Water and the entrepreneurial city

Geoforum 58 (2015) 195–207
Contents lists available at ScienceDirect
Geoforum
journal homepage: www.elsevier.com/locate/geoforum
Water and the entrepreneurial city: The territorial expansion of public
utility companies from Colombia and the Netherlands
Kathryn Furlong
Canada Research Chair in Urban, Water and Utility Governance, Département de géographie, Université de Montréal, Pavillon 520, Côte-Ste-Catherine, Canada
a r t i c l e
i n f o
Article history:
Received 13 February 2014
Received in revised form 11 September 2014
Available online 11 October 2014
Keywords:
Entrepreneurial city
Social reproduction
Water
Commercialization
Schumpeter
Public utility
a b s t r a c t
Since the mid-1980s, liberalization has motivated numerous water supply reforms. Among these,
privatization has received the most attention. Yet, its actual scope has been limited. Beyond privatization,
the territorial expansion of municipally owned water corporations into new service areas can be
witnessed in countries as diverse as Italy, South Africa, Canada, Colombia and the Netherlands. Generally,
the activities of public water corporations are analyzed through the lens of commercialization. This
framework is central to understanding recent shifts in water supply. Yet, while it addresses the effects
of commercialization on service quality and access, it rarely integrates the influence of shifts in social
reproduction and collective consumption in structuring reform. Drawing on theories of urban
entrepreneurialism, I attempt to advance a broader analytical framework that is more amenable to
integrating the diversity of processes involved, including but not limited to commercialization. At the
same time, the territorial expansion of municipally owned water corporations suggests ways to rethink
urban entrepreneurialism: it is not only commercial, it is also social, and it is Schumpeterian. To make
these points, this article examines the efforts of two public water corporations to go international:
EPM of Medellín, Colombia and WMD of Drenthe, the Netherlands.
Crown Copyright Ó 2014 Published by Elsevier Ltd. All rights reserved.
Introduction
The Empresas Públicas de Medellín (EPM) is a multi-utility corporation owned by the City of Medellín, Colombia. The city is its
sole shareholder to which it pays an annual dividend. In 2010, this
dividend approached $US 715 million.1 In 2005, EPM’s Board of
Directors established La Meta Estratégica Grande y Ambiciosa. Known
simply as La Mega, it sets a target of 40% for the portion of EPM’s
activity that should be international by 2015. Having struggled to
meet this goal, EPM turned to domestic expansion. With respect to
water and sanitation, it has created five regional subsidiaries and
competed for service contracts in other parts of Colombia. In the
Netherlands, public water corporations have also taken an interest
in ‘‘international water markets’’. In the 1980s, they embarked on
‘‘twinning’’ arrangements to share expertise with struggling utilities
in the South. Today, the Dutch water utilities engage in a variety of
projects from twinning to Joint Venture Companies (JVC). In 1999,
the Waterleidingmaatschappij Drenthe (Water Company of Drenthe
– WMD) set up its first JVC with a locally owned water corporation
– or PDAM2 – in Indonesia. Today, there are five in operation.
1
2
E-mail address: kathryn.furlong@umontreal.ca
The EPM data are taken from the database (Bonilla et al., 2013).
Perusahaan Daerah Air Minum or PDAM (TWD, 2009).
http://dx.doi.org/10.1016/j.geoforum.2014.09.008
0016-7185/Crown Copyright Ó 2014 Published by Elsevier Ltd. All rights reserved.
This drive for territorial expansion is not limited to EPM and
WMD. It is common to municipal water corporations from countries
as diverse as Italy, Canada, South Africa, Uganda and Brazil (Grossi
and Thomasson, 2011; Kuoppakangas, 2013; McDonald and
Ruiters, 2012). EPCOR, a multi-utility corporation owned by the City
of Edmonton, Canada has water contracts in the United States,
British Colombia and Alberta. ACEA of Rome has contracts in Latin
America. Rand Water of South Africa has projects elsewhere in
Africa. Acting domestically, COPASA of Minas Gerais, Brazil and
the National Water and Sewerage Corporation of Uganda have
operations contracts in their own countries (Martins de Andrade,
2010: 43). A public corporation is an entity incorporated as a private
company with government as the sole shareholder.3 For water, the
government shareholder is usually the municipality or a group of
municipalities for which the utility provides services. Public
corporations have different names in different countries, here the
term Local Public Corporation (LPC) is used (see Smith, 2012).
Through the comparison of two case studies – EPM of Medellín
and WMD of Drenthe – this paper seeks to: (1) expand the ways in
which the commercial activities of LPCs are analyzed by engaging
3
Some also refer to corporations with mixed public–private ownership as public
corporations (e.g. Anastassopoulos et al., 1985).
196
K. Furlong / Geoforum 58 (2015) 195–207
with the role of social reproduction (and collective consumption)
in structuring reform; and (2), in so doing, contribute to the literature on urban entrepreneurialism. First, in terms of social reproduction and collective consumption, research on the growth and
expansion of LPCs tends to focus almost exclusively on commercialization (e.g. McDonald and Ruiters, 2005; Schwartz, 2008;
Smith, 2004). While important, the territorial expansion of LPCs
has many, often overlapping, motivations and effects. It involves
commercial projects that are often imbedded in a neoliberal discourse, but the activities are also more nuanced. In the cases studied, there is an explicit engagement in improving the conditions
of social reproduction. For example, the JVCs of both EPM and
WMD are located in areas deemed unattractive for the private sector, i.e. where population and income are insufficient to guarantee
a return on capital.4 This does not mean that the projects disregard
the demands of capital. Rather, new formations of state engagement
with social reproduction in relation to capital are emerging (Katz,
2001; Meehan and Strauss, 2015; Mitchell et al., 2003).
Second, in this paper, the lens of urban entrepreneurialism is
used to explore how these relationships are being reworked
through the territorial expansion of LPCs. The turn to urban
entrepreneurialism enables one to engage with commercialization
while integrating the importance of shifts in social reproduction
in mediating (and being mediated by) what are more than
commercial reforms. This is not inherent in the urban entrepreneurialism literature. Thus, social entrepreneurialism and theories
that collapse the binary between social reproduction and capitalist
production are also mobilized. It is shown that urban entrepreneurialism is not only expressed through inter-urban competition,
it is also social and Schumpeterian (involving the pursuit of new
market activities). In this market expansion, the state – via
water-LPCs – extends its dialectic of social reproduction/capitalist
production beyond its traditional territory.
This paper begins with a brief note on methods. Then, in Section
‘Overview’, an overview of utility expansion in the two case studies
is provided to contextualize the theoretical discussion that follows.
In Section ‘Utility commercialization and the entrepreneurial city’,
the urban entrepreneurship literature is discussed, linking it to
related shifts in the organization of social reproduction and
collective consumption. In Section ‘Two cases of territorial
expansion’, a more detailed examination of the cases is provided.
Through this discussion, I demonstrate how an urban entrepreneurialism lens can enrich analyses of recent water supply reform,
but that ultimately the dynamics of social reproduction and collective consumption need to be considered. To do this, the empirical
material is regularly linked back to the theoretical discussion to
push it further.
A note on methods
This paper adopts a ‘‘project’’ as opposed to a scalar basis for
analyses. It does not focus on the city as a scale but on a common
project that links different cities (see Robinson, 2011): that of
employing LPCs as vehicles for shareholder profit, market expansion, and development cooperation. This follows recent work on
urban ‘‘experiments’’ (e.g. Bulkeley and Castán Broto, 2013) as well
as critiques of assuming a universal ontology to ‘‘scale’’ and scalar
processes (Robinson, 2011; Tsing, 2000). Recent research has
questioned scale as a fixed unit of analysis that can be accurately
compared across space, arguing that contestation is not over scale,
but the ‘‘particular areas of social activity and public policy’’ in
which the role of scale will ‘‘vary considerably’’ (MacKinnon,
2010: 23, 29).
4
See Budds and McGranahan (2003).
In adopting a focus on projects, moreover, the article follows
Robinson’s call to refuse developmentalist hierarchies in the study
of urban processes (Robinson, 2005). For Robinson, limiting comparison to cities with equivalent levels of development betrays
an econocentrism, whereby everything else is either secondary to
or determined by economic factors (Robinson, 2011). As such, comparisons of projects that touch cities from the North and the South
can reveal ‘‘unexpected connections’’ by engaging with diversity
(Pickvance, 1986; Robinson, 2011). This is important in the case
of LPC expansion, which seeks to enlist cities with very different
levels of economic development in common projects, motivated
by both social and commercial goals.
To explore the territorial expansion of water-LPCs, this article
focuses on WMD of the Netherlands and EPM of Colombia because
both have expanded by creating Joint Venture Companies (JVCs),
and because both countries have a long history with water-LPCs.
The paper is based on fieldwork conducted in Medellín between
2009 and 2013 and in the Netherlands between 2011 and 2013.
The research includes archival work on the history of LPC expansion, a review of newspaper articles over the past fifteen years,
and 39 interviews (28 in Colombia and 11 in the Netherlands) with
utility management, government officials, as well as environmental, consumer and other related groups.
Overview
Basic drivers of LPC expansion
The territorial expansion of water-LPCs can be traced to the promotion of North–South twinning arrangements and to the liberalization of public utilities in the 1980s. Widespread inequalities in
accessing potable water and sanitation were brought to worldwide
attention with the declaration of the UN International Drinking
Water Supply and Sanitation Decade in 1980. Highlighting the crisis,
the UN began promoting North–South twinning arrangements
whereby well-functioning utilities from the North would share
knowledge with struggling water utilities in the South. As relationships became more formalized, they developed into Water Operator Partnerships (WOPs) (Hall et al., 2009). In the Netherlands,
water-LPCs began twinning with utilities in a variety of countries,
relationships that eventually transformed into WOPs, operations
contracts, and JVCs (Pistorius, 2008).
At the same time, liberalization gained ground. Beginning in the
1980s, it was assumed that the application of commercial management principles and the introduction of private sector ‘‘discipline’’
would improve utility services. Deregulation and reregulation
were used to promote private sector participation (PSP), full cost
recovery, and independence from local government (Furlong,
2010). Concomitantly, increasing budget restraint was imposed
on municipal governments (Harvey, 2005; Jessop, 1997). Together,
these reforms encouraged the creation and growth of LPCs across a
range of services including water supply (Hoorens et al., 2004;
Vallespín and Gianfelici, 2011). While the LPC was widely promoted, the primary purpose was not always to commercialize.
Sometimes, cities sought to remove debt from their ledgers in compliance with new EU restrictions (Argento et al., 2010), to skirt certain regulations (Vallespín and Gianfelici, 2011), to generate profits
to fund other municipal services (Kuoppakangas, 2013), or to comply with requirements imposed under structural adjustment programs (TWD, 2009).
The nature and mandate of public corporations also shifted during this period. Traditionally, they were state owned and focused on
the delivery of ‘‘government programs of a commercial character’’
(Seidman, 1983: 65). With neoliberalization, public corporations
adopted a commercial orientation (Wettenhall and Thynne,
K. Furlong / Geoforum 58 (2015) 195–207
2011), and looked to transnational expansion and product diversification to generate profit (see Clifton et al., 2007). At the local level,
water-LPCs are encouraged to expand into new ‘‘water markets’’
and new types of services such as industrial water, bottled water,
consulting, and the development of new technologies and processes. Some refer to this as a ‘‘deterritorialization’’, because LPCs
(in contrast to private corporations) are meant to focus on the economic and social development of their geographical area, rather
than their own economic development (Hoorens et al., 2004).
Empresas Públicas de Medellín (EPM)
EPM was formed in 1955 when the existing water and sewer
LPC merged with that responsible for electricity, telecommunications and gas. EPM is consistently among Colombia’s ten largest
companies.5 While its growth accelerated in the mid-1970s, it
became ‘‘explosive’’ in the early 1990s. Its net worth increased
approximately ten-fold within fifteen years (Bonilla et al., 2013).
This growth is coincident with the liberalization of Colombia’s utilities, especially through the Law 142/1994. This law also led to EPM’s
conversion from an Empresa de Servicios Públicos (ESP – Public Utilities Company) to an Empresa Industrial y Commercial del Estado (EICE
– State Industrial and Commercial Company),6 which while retaining
public ownership is governed by private as opposed to public law
(Ríos, 2008).
EPM’s territorial expansion began shortly thereafter and was
codified in La Mega in 2005. This growth differed across EPM’s services, with increasing international and domestic investments in –
and revenues from – energy and telecommunications, which was
separated from EPM in 2006. These investments have translated
into increasing debt to both international and domestic lenders,
which quadrupled between 2005 and 2010 (Bonilla et al., 2013).
These issues certainly influence the types of projects that EPM pursues (and vice versa). On water, however, while the LPC planned to
engage in profit generating projects abroad, various challenges particular to water forced EPM to reconsider its ambitions.
Prior to the introduction of La Mega in 2005, EPM formed its
first subsidiary for water – Aguas del Oriente – in 1998 in Rio Negro,
approximately 50 km from Medellín. For water and sewer, collectively managed as EPM–Aguas, the 40% international activity
required by La Mega translated into a specific growth target of
$US 107 million by 2015. The strategy for achieving this involved
investing in Build–Operate–Transfer (BOT) projects abroad, developing the associated infrastructure (e.g. a treatment plant) over
approximately 25 years, and then selling it at a profit.7 For reasons
explored below, no projects of this type were developed. Instead,
international activities in water are limited to one international subsidiary, consulting, and WOPs (EPM, 2012a).
Given the challenges of internationalization, by 2008 EPM had
already turned its focus to domestic expansion. Staff explained that
La Mega will be reached, but through domestic as opposed to international growth. Currently, EPM–Aguas has six water subsidiaries,
five of which are regional JVCs located in underserviced areas of
the departments of Antioquia and Atlántico. The shareholders are
the local municipalities, the department, and EPM, as the majority
shareholder. So far, none of these subsidiaries has generated dividends for EPM. They are seen as long-term, even quasi-permanent,
projects. Investment is to be recuperated over up to 40 years.8 The
final subsidiary, Aguas Nacionales, was created to manage projects
from technological development to management contracts. At present, it comprises the company Aguas del Atrato, which was created
5
6
7
8
www.portafolio.co.
Acuerdo No. 69 de 1997.
Interview, EPM, International Growth – Water Division, June 2010.
Interview, EPM New Water Projects Division, June 2010.
197
at the request of the Colombian government to help resolve long-term
water supply problems in the City of Quibdó. An organogram of EPM
and its subsidiaries is presented in Fig. 1. They are mapped in Fig. 2
with other key features of the projects and their locations. These
are discussed in Section ‘Thinking about urban entrepreneurship –
social and commercial?’.
Waterleidingmaatschappij Drenthe (WMD)
On the surface, the strategy and goals for expansion differ
remarkably between EPM and WMD. In the Netherlands, initial territorial expansion occurred through utility consolidation. Today,
ten large utilities supply water for the whole country; most are
owned by multiple municipalities and nine are LPCs. All have
engaged in water supply projects in the South. Beginning as twinning arrangements in the 1980s, today they also include operations
contracts, JVCs, and consulting services in countries across Africa,
Asia, Eastern Europe, and (to a lesser extent) Latin America. The
primary objective is development cooperation under a ‘‘not for
profit, not for loss’’ model. While some utilities have focused geographically, like WMD in Indonesia, others are engaged in a variety
of countries around the world.
WMD’s shareholders include twelve municipalities in the Province of Drenthe. In 1994, WMD began a twinning project with
PDAM Ambon in Ambon (Maluku), Indonesia. In 1998, WMD and
PDAM Ambon decided to form a JVC in which WMD owns 58% of
the shares. In 2005, the Dutch government committed €16.5 million to expand this type of project to include nine new JVCs
between WMD and other Indonesian PDAMs (four in North Sulawesi and five in Papua). These are based on 15-year agreements, at
the conclusion of which the local PDAMs can buy WMD’s shares
or continue with the partnerships. To manage these JVCs and to
protect WMD from exposure to financial risk, several subsidiary
companies were formed. Although there are officially nine JVCs,
only four of the proposed JVCs became operational (SWOI, 2012;
WMD, 2012). WMD has controlling shares in all of them. The
organogram of WMD subsidiaries and JVCs related to its work in
Indonesia is shown in Fig. 3.9 They are mapped in Fig. 4. Again,
the other aspects of this figure are discussed in Section ‘Thinking
about urban entrepreneurship – social and commercial?’.
Utility commercialization and the entrepreneurial city
Urban entrepreneurialism has rarely been used to analyze
changes in the organization and management of water utilities
under neoliberalization.10 Instead, the related lenses of commercialization, marketization and privatization have dominated (e.g. Bel
and Fageda, 2008; Boag and McDonald, 2010; Schwartz, 2008).
While such studies have been instrumental, the strict focus on commercialization and marketization risks confining the drivers, constraints and motivations of reform to the economic, and thus
overlooking how they are intertwined with the social. By engaging
with urban entrepreneurialism as well as theories of social reproduction and collective consumption, I seek to offer preliminary steps
toward an analysis of ongoing transitions in water supply that can
account for the nuanced relationship between commercialization
and the state’s shifting engagement with social reproduction and
collective consumption.
Urban entrepreneurialism emerged in the 1970s as a local and
regional government strategy to cope with increasing gaps
between revenues and costs. Cities, particularly in the US, faced
9
In the interest of space, subsidiaries unrelated to the Indonesian projects are not
included in Fig. 3.
10
For an exception, see Windischhofer (2007).
198
K. Furlong / Geoforum 58 (2015) 195–207
Fig. 1. Partial organogram of EPM, focusing on its water subsidiaries.
important cuts to inter-governmental transfers, making them more
dependent on commercial development to fund local services
(Harvey, 1989; Leitner, 1990). This, combined with capital mobility, compelled urban governments to compete in creating the supposedly ideal conditions for capital investment (Harvey, 2005).
Cities – often supported by states11 – reduced development charges,
corporate taxes, planning restrictions, as well as environment and
labor protection in order to promote themselves as less costly and
‘‘restrictive’’ sites for private development (Hall and Hubbard,
1998; Harvey, 1989; Sager, 2011).
Cochrane summarizes the phenomenon as a dramatic shift in
urban governance, from a concern with service provision to a focus
on economic development (Cochrane, 2007: 85). Still, cities are not
powerless in the face of these policies nor are they uniform in their
response. While authors like Harvey (1989) saw cities as essentially hemmed-in by capital mobility and national fiscal policy,
others gave more weight to local pressures in driving entrepreneurialism and to local conditions in shaping its nature and degree
(Leitner, 1990). For Leitner, while national and international policy
circumscribe local action, it cannot simply be ‘‘read off from
11
For Jessop, the ‘‘entrepreneurial city’’ and ‘‘competition state’’ are coincident
phenomena whereby government is reduced to ‘‘promoting the competitiveness of
their respective economic spaces’’ (Jessop, 1997: 28).
broader structural developments’’ (Leitner, 1990: 153). This is in
fact the basic argument of ‘‘actually existing neoliberalism’’, that
the effects of reform are altered at the local scale where the social
impacts are most readily felt and thus resisted (Brenner and
Theodore, 2002; Leitner et al., 2007).
What does this have to do with water supply? Many of the policies credited with driving urban entrepreneurialism are akin to
those that encouraged the commercialization of water supply.
Urban entrepreneurialism was fueled by critiques of local government that focused on its ‘‘failure’’ to generate economic development (Cochrane, 2007: 85). In response, urban policy was
reformed to ‘‘fit with a wider national political rhetoric of economic regeneration, public–private partnership, and infrastructural investment to support development’’ (Cochrane, 2007: 90).
These tropes – government failure, private sector participation,
and crumbling infrastructure – also drove neoliberal water supply
reforms (Furlong, 2010).
Thus, similar pressures may generate different manifestations
of entrepreneurialism, not only between different municipalities,
but also for different services. In 1979, Goodman called local government officials ‘‘the last entrepreneurs’’ because they (and not
the private sector) now assumed the risk for private ventures
(Goodman, 1979). For water supply, the introduction of private
sector participation (PSP) likewise depended on public (and not
K. Furlong / Geoforum 58 (2015) 195–207
199
Fig. 2. Map of EPM and its water subsidiaries Ó Marc Girard (2014). Sources: Aguas de Malambo (2013), Aguas de Occidente (2013), DANE (2005) and EPM (2012b).
private) investment (Budds and McGranahan, 2003), what Ruckert
calls ‘‘accumulation by subsidization’’ (Ruckert, 2007: 101). Subsequent efforts to share risk between government and the private
sector served to curb the latter’s interest in the water ‘‘business’’
(Bakker, 2004; Furlong, 2012). The expectation that private operators would take responsibility for social reproduction in terms of
service extension, water quality, and source water protection, generally translated into perceptions of increased risk and reduced
profitability – and therefore diminished interest – on the part of
the private sector (Bakker, 2004; Budds and McGranahan, 2003).
What recent LPC activity indicates is that urban entrepreneurial
risk can be taken for public and not simply for private accumulation
(the shareholders being municipalities). Moreover, it can be
‘‘entrepreneurial’’ in the Schumpeterian sense of the term, i.e.
seeking to create surplus through innovation by developing ‘‘new
combinations’’ via new markets, goods, processes, and organizations
(Schumpeter, 1983). For Jessop and Sun, there are two forms of
urban entrepreneurialism of which inter-urban competition to
attract investment is but one. Another is Schumpeterian; it works
to build ‘‘linkages to the wider economy’’ to make itself a player
therein (Jessop and Sum, 2000: 2293). The rise in the number and
size of LPCs for a variety of utility services (Hoorens et al., 2004),
and their efforts to increase dividends and to engage in ‘‘new
markets’’ (Clifton et al., 2007) reflects this second form of urban
entrepreneurialism. Rather than competing with nearby localities,
cities and states engage in international ‘‘markets’’ (via their LPCs)
for the sale of utility services and associated products.
These two types of entrepreneurialism are related through
shifting relationships to social reproduction. Leitner finds that
resistance to entrepreneurialism qua inter-urban competition
results from the inability to reconcile the conflicting demands of
ensuring profit on private investment, universalized community
200
K. Furlong / Geoforum 58 (2015) 195–207
Fig. 3. Partial organogram of WMD, focusing on its Indonesian subsidiaries.
Fig. 4. Map of WMD activities in Indonesia Ó Marc Girard (2014). Sources: Statistics Indonesia (2010), WMD (2013) and www.waterfund.nl/.
K. Furlong / Geoforum 58 (2015) 195–207
services, and social order. The incommensurability of these responsibilities creates pressure for and against urban entrepreneurial
policy (Leitner, 1990: 156). It can be said that its commercial goals
conflict with expectations for it to secure the conditions of social
reproduction and collective consumption. Entrepreneurialism as
territorial expansion effectively transfers apparent risks to service
quality to other locales where the city is not responsible for reconciling the plethora of competing demands enumerated by Leitner.
Moreover, where the economic risks of LPC expansion result in
unforeseen costs to the owning municipality (and its residents),
responsibility can be deflected onto the LPC as a theoretically independent entity.12 For Savoie, averting responsibility is a key reason
why local governments establish LPCs and other arm’s length bodies
(Savoie, 1995: 113).
Irrespective of how responsibility is assigned, the effects are
real and lived locally. As such, territorial expansion must not be
confused with ‘‘deterritorialization’’. As Brenner argues with
respect to globalization, focusing on deterritorialization misses
Lefevre’s insight that capital, while mobile, remains dependent
on territorialized entities at multiple scales, including state institutions (Brenner, 1999). This is why capital mobility requires fixity –
such as infrastructure (Harvey, 1985). Infrastructure, however, is
central not only to capital accumulation but also to social reproduction. Capital mobility, while needing infrastructure, likewise
abandons it; thus, leaving it to deteriorate (Swyngedouw, 1992),
weakening its ability to serve its social function (Moss, 2003).
Although the urban entrepreneurialism literature often treats
social reproduction and consumption as subordinate to commercial goals, the approach is increasingly challenged. Cochrane, for
example, warns against ‘‘present[ing] the shift to a ‘growth agenda’
as inevitable’’. Even in its entrepreneurial form, ‘‘urban policy . . . can be understood as social policy’’ since there are choices
being made that have implications beyond ‘‘efficiency’’ and growth
(Cochrane, 2007: 103). Ward and Jonas, moreover, argue that the
competitive cities literature has limited its own explanatory power
by neglecting ‘‘geographies of collective consumption’’ including
service provision, infrastructure, social-welfare and environmental
protection (Ward and Jonas, 2004: 2121). This may be of increasing
importance as the social characteristics of cities are seen as outpacing their economic features in defining their ‘‘competitiveness’’
(Jessop and Sum, 2000: 2310–2311). In this way, promoting a city’s
‘‘symbolic economy’’ or ‘‘greenness’’ to attract tourists and residents has become an important mode of urban entrepreneurialism
(Cronin and Hetherington, 2008; While et al., 2004). This underscores Castell’s point that the politics of collective consumption
are entwined with the state’s role in securing the conditions for
capital production (Castells, 1972).
Like other forms of urban entrepreneurialism, the drivers of and
constraints on LPC expansion are both social and commercial. This
point can be clarified by contrasting theories of social and commercial entrepreneurship. However, caution is warranted: social entrepreneurship theory is relatively nascent (Smith and Stevens, 2010)
and neglects the complexity of social reproduction in sustaining
capitalist production. Instead, it places them on a continuum, failing to recognize that they exist in a web of exchanges that incorporate market and nonmarket activity ‘‘in an absolutely essential and
inextricable embrace’’ (Mitchell et al., 2003: 423).
Authors concerned with social entrepreneurship see a continuum between social and commercial entrepreneurship that moves
closer to either end of the spectrum according to the relative preponderance of particular goals and practices. At its core is the relative importance of creating ‘‘social value’’ versus ‘‘shareholder
12
Many studies have demonstrated the continued influence of municipal government on utilities following their corporatization (e.g. Kuoppakangas, 2013; Schwartz,
2008).
201
profit’’ (Dees, 1997; Sullivan Mort et al., 2003). While most entrepreneurship will involve some combination of social and commercial objectives, ‘‘even at the extremes’’ (Austin et al., 2006: 3), their
relative balance will influence the geography and the exercise of an
organization’s activities. The more an organization focuses on creating social value, the more its geographical focus differs from that
of a commercial enterprise. Social entrepreneurship engages in
locations that commercial entrepreneurs are conditioned to avoid,
i.e. those characterized by unstable regulatory environments, a
‘‘clientele’’ without the means to pay, poor infrastructure, and
‘‘market failure’’ (Austin et al., 2006; Di Domenico et al., 2010).
This is consistent with broader theories of entrepreneurialism.
For Schumpeter, the entrepreneur and the (fictive) homo economicus are distinct; the entrepreneur is not governed by economic
rationality, but by the pursuit of innovation (Shockley and Frank,
2011). Here, ‘‘innovation’’ – the other key element of social entrepreneurship (Nicholls and Cho, 2006) – refers to the mobilization
of resources to serve ‘‘basic, long-standing needs more effectively
through innovative approaches’’ as opposed to product breakthroughs (Austin et al., 2006: 5). To understand this type of nonmarket innovation, authors have turned to the building of social
as opposed to economic networks for explanation, drawing on
the concept of bricolage (e.g. Di Domenico et al., 2010). Bricolage
complicates institutional theories of resource management by
showing how ‘‘institutions’’ are continuously formed and reformed
through social relationships, in interaction with local context and a
variety of actors linked, directly and indirectly, to formal networks
(Cleaver, 2002, 2012). For Hindle this makes a ‘‘deep understanding’’ of ‘‘community context’’ essential (Hindle, 2010).
Even a cursory examination of the activities of EPM and WMD
demonstrates that there is more going on than commercial entrepreneurship. Many of their activities more closely resemble those
associated with social entrepreneurship. The question that remains
is: how can this be understood in a way that integrates rather than
bifurcates capitalist production and social reproduction? Many
authors have cogently argued that the state’s role in social reproduction and collective consumption is of a piece with its role in
ensuring the necessary conditions for capital and profit (Castells,
1972; Cockburn, 1977; Mitchell et al., 2003). For Castells, the
state’s level of engagement with the provision of the associated
services (welfare, housing, transportation, etc.) is constantly shifting as it seeks to ensure the requisite social reproduction for the
creation new spaces of private accumulation (Castells, 1972).
This instability in the state’s commitment as the guarantor of
social reproduction and collective consumption can be seen in
both the uneven access to services and their decline over the neoliberal period. For Katz, the retreat from social reproduction
should be understood as a state-backed reworking of the relationship between capital production and social reproduction (Katz,
2001). The lived results of these reforms are captured in the concept of ‘‘life’s work’’, whereby the activities and sites of capitalist
production and social reproduction have become blurred, simultaneous and overlapping – no longer can one claim a geographical
separation between the factory and the home (Mitchell et al.,
2003). Yet, they are also spatially separated in new ways. For
migrant workers engaged in the mesh of production and reproduction abroad, the site of social reproduction is made unreachable not only by distance but by various government
regulations (Mountz, 2003; Pratt, 2003). To understand these
changes, the authors argue that we need to change the way we
view the state and how it rules and creates new spaces of ‘‘rule
and ruling’’ (Mitchell et al., 2003: 433). In the case of LPCs, governments – via utilities – are not strictly disengaging from social
reproduction, but engaging in new sites of social reproduction
both to open new spaces for private (and public) profit and to
support social reproduction at home.
202
K. Furlong / Geoforum 58 (2015) 195–207
Fig. 5. Dividends paid by EPM to the City of Medellín (1957–2010). Source: Adapted from Bonilla et al. (2013).
Two cases of territorial expansion
In the paragraphs below, I compare the expansion projects of
EPM and WMD in terms of their motivations, the facilitators and
constraints imposed at different scales, and ultimately how the
projects mix social and commercial goals. Through these discussions, I seek to understand how an urban entrepreneurial approach
that is sensitive to social reproduction might help to enrich our
understanding of LPC expansion and the broader neoliberalization
of water supply.
Why grow?
In interviews, management at EPM and the Dutch LPCs, including WMD, emphasized that their traditional ‘‘markets’’ are ‘‘saturated’’. If they are to grow, it must be outside of their traditional
service area. Yet, the saturation to which they refer differs in scale
and in scope. For EPM, market saturation refers to Medellín and its
greater urban area, the Valle de Aburrá. Utility management argues
that, within this area, it is impossible to grow except ‘‘vegetatively’’
through the connection of new users. In the case of WMD and other
Dutch utilities, it is the water supply markets of the Netherlands
and surrounding countries that are ‘‘saturated’’. LPC management
sees no way to grow domestically or in adjacent EU countries
where high-quality, universal water services are the norm.
But why should ‘‘market saturation’’ be a concern for a waterLPC entrusted with the social and economic development of its service area? EPM management describes shareholder (i.e. municipal)
pressure to increase its dividend. EPM’s dividend has increased
nearly 20-times since its reform in the mid-1990s (Fig. 5), chiefly
through its activities on energy. By local statute, the dividend is
capped at 30% of profit and must be invested in local social programs.13 Since the mid-1990s, EPM has made additional ‘‘extraordinary’’ transfers such that the dividend averaged 45% of profit from
1994 to 2008.14 In 2007, ‘‘extraordinary’’ transfers were legalized
by municipal agreement ‘‘such that neither [EPM’s] viability nor its
growth are put at risk’’ (Alcadía de Medellín, 2007). Here, capitalist
production is enmeshed with public dividends and social reproduction at ‘‘home’’: Medellín’s spending on social projects has increased
by 129% since 2007, with 40% of its revenues coming from EPM
(Muñoz, 2013).
EPM management is also driven to increase the LPC’s size and
status. Interviewees from EPM explained their focus on growth
as a natural element of their corporate identity – somos empresa
– and as part of their responsibility to improve the standard of living in underserviced parts of Antioquia, their home Department.
Indeed, their regional JVCs are not located in lucrative areas and
will require long-term investment before any dividend can be
expected. Other than those adjacent to Medellín, the JVCs are
located in areas with an average level of unmet basic needs (NBI)
greater than 25% (Fig. 2). Aguas del Oriente, established in 1998
and with an NBI of only 10%, does not yet return a dividend.
Although it is considered to have reached the same standard of service as in Medellín,15 surplus is reinvested in the water utility. Commercial concerns are more explicit (but not necessarily dominant)
when EPM acts outside of Antioquia. It sees its contributions to
WOPs (Fig. 1), for example, as a way of creating opportunities for
future commercial contracts.16
EPM’s external projects have both commercial and social goals.
These can overlap and serve to increase the reputation of the LPC,
and that of the city – serving to further the ‘‘social’’ reproduction of
both. For Leitner, local drivers of entrepreneurialism include ‘‘the
interests of the [local] state and its managers to maintain or
increase fiscal resources, advance individual career interests, maximize agency resources, and enhance the institutional power of the
local state in general’’ (Leitner, 1990: 156). In Medellín, EPM is a
major employer, with 6034 direct employees and more than
14,000 across its subsidiaries (EPM, 2012b), it is a major source
of local revenue, and an important provider of cultural services,
such as the Bibliotheca EPM (Fig. 6). Like the development agencies
discussed by Leitner, EPM occupies a prominent position in the
local political landscape. The person whom mayoral candidates
15
13
14
Acuerdo 69, 1997.
Calculation made using EPM annual reports (1994–2008).
16
Interview, EPM New Water Projects Division, June 2010.
Interview, EPM, International Growth – Water Division, June 2010.
K. Furlong / Geoforum 58 (2015) 195–207
203
Fig. 6. La Biblioteca EPM Ó Catalina Bonilla (2013).
will appoint as Director General of EPM is considered by some to
be as important as the candidate in local elections.17
For the Dutch LPCs, including WMD, ‘‘market saturation’’ means
stagnation. Utility managers explain that all major water management problems in the Netherlands are controlled and well understood18; their work is one of maintaining the status quo.
Consequently, they have difficulty attracting young employees.
Faced with an aging workforce, their external projects create a sense
of progress, present new challenges and learning opportunities, and
help them to attract young people as a result (see also Martins de
Andrade, 2010). In this way, expanding beyond their territory is a
way of creating sustainability and renewal in the water sector at
home – of ensuring its own social reproduction in a way that is similar to, yet different from, EPM. According to Leitner ‘‘securing jobs’’
and ‘‘providing services’’ are two pressures faced by municipalities
that inform urban entrepreneurialism. For the Dutch LPCs, these
two pressures overlap.
Pressures for dividends are not a factor in the decisions of the
Dutch LPCs to pursue projects in the South. Respondents repeatedly stated that it would be unacceptable to their shareholders
(ultimately Dutch citizens) for them to profit from such projects.
WMD has even learned that it must be careful about how it recovers its investments (see below). This difference with EPM, which
emphasizes a profit motive (although unachieved on water), supports arguments that local factors and differences between cities
engender differences in their entrepreneurial endeavors. Other
more ‘‘subtle’’ differences also exist. WMD’s geographical focus
results from the Netherlands’ colonial relationship with Indonesia,
which was critical in establishing the uneven geography of water
supply that persists in Indonesia today (Kooy and Bakker, 2008).
Following independence, immigration from Indonesia’s Maluku
province concentrated in Drenthe. This provided both the impetus
and the contacts needed to start the first project in Ambon.
Influences beyond the LPCs
While important, municipalities and LPCs are not autonomous
in their strategies for territorial expansion. For Cochrane, local
autonomy must not be ‘‘exaggerated’’ as entrepreneurialism fits a
‘‘state level response’’, whereby cities replace private firms as
national champions in international competition (Cochrane, 2007:
17
18
Interview, Local journalist and author, May 2011.
Although problems do arise (e.g. Rangers, 2007).
99). For such Schumpeterian entrepreneurial activity, moreover,
cities and their agents are dependent on multi-scalar networks
(Jessop and Sum, 2000: 2293). This is likewise true of the politics
of social reproduction. While many services may be delivered
locally, the politics of access and exclusion must be seen in a context of state relationships to capital under globalization
(Cockburn, 1977; Katz, 2001). These assertions are applicable to
LPCs. Their mix of social and commercial entrepreneurial activity
is guided by state policy, involves networks of actors, and can be
constrained by a variety of factors that are often missed without a
nuanced view of commercial entrepreneurialism.
The importance of state guidance and networks is particularly
evident in the Dutch case where the government has taken on
water as a cornerstone of its economic and international development policies – extending state engagement in social reproduction
to support capitalist development beyond its own borders. State
influence over LPC expansion is animated by contradictions
between the desire to promote Dutch water expertise as a vehicle
for economic growth, and the desire to limit the risks taken by LPCs
in these pursuits. Under the 2009 Water Act, the government limited LPC investment in external projects to development assistance
and to 1% of annual revenue. Most interviewees and newspaper
reports interpreted this as a response to the aggressive commercial
growth of a single water-LPC, Evides of South Holland (e.g.
Engelenburg, 2013). This theory is supported by the assignment
of tariff oversight to the Netherlands Authority for Consumers
and Markets (ACM). From 2013, the ACM reviews domestic water
pricing and ensures that there is no cross-subsidization of commercial activities with drinking water tariffs, in accordance with
the 2009 Water Act.19
As opposed to LPC investment, projects mostly depend on government funding. This is consistent with Schumpeter’s distinction
between entrepreneurs and capitalists, emphasizing that entrepreneurs rarely finance projects (Shockley and Frank, 2011). In the
case of WMD’s four new Indonesian JVCs, the Dutch government
allocated €7.5 million in soft loans through the Directorate-General
for International Cooperation (DGIS) and set up the Foundation for
East-Indonesian Water Projects (SWOI) through which to transfer
the funds to WMD’s subsidiary BV Tirta Drenthe (Fig. 3). WMD
contributed €1.5 million in the form of a soft loan and €2 million
as risk capital (Pistorius, 2008).20 This money was to be spent on
19
20
Interview, ACM, June 2013.
The initial funding allocated for the 10 planned JVCs was €16.5 million.
204
K. Furlong / Geoforum 58 (2015) 195–207
infrastructure within the first five years, at which time the projects
were to become self-financing (SWOI, 2012). In 2011, the Dutch
Embassy in Indonesia guaranteed a further €3.5 million (SWOI,
2012).
For other international water projects, the Dutch Government
typically allocates funding to various Ministries, agencies, and
NGOs.21 Organizations apply for funding on a project basis, often
collaboratively (cf. Baud et al., 2010). WMD’s work with Water Fund
Holland (WFH), a partnership with four other Dutch water-LPCs, is
an example (Figs. 3 and 4). Thus, following, Jessop and Sum
(2000), the territorial expansion of WMD, and the Dutch LPCs in general, involves cooperation between the LPCs, various scales of government, NGOs, and other organizations. This is in contrast to the
early urban entrepreneurialism literature, which sees cities (or
regions) as competing against each other in response to their abandonment by the state.
The dependence on broad coalitions and the involvement of the
state also influences the nature of the projects. In 2013, the Dutch
government approved changes to development cooperation that
place a greater focus on trade and investment (Government of
the Netherlands, 2013). For water, this shift began in 2011 with
its designation as one of ten national ‘‘top sectors’’. This is meant
to encourage LPCs to partner with private companies to develop
international projects (Trappenburg, 2011), and to seek further
opportunities in middle and high-income countries (Gleijm et al.,
2013). For projects in the South, this means that the water LPCs,
while not generating a profit, should use the projects to open doors
for the Dutch private sector in the associated countries
(Engelenburg, 2013).22 Here, social reproduction is a vehicle for
future private accumulation.
Shifting representations of water as ‘‘economic diplomacy’’ as
opposed to ‘‘development cooperation’’ matter for urban entrepreneurialism that is oriented toward social reproduction. Engaging in
entrepreneurialism is a discursive exercise, involving the ‘‘constitution of economic paradigms, identities and modes of calculation
that justify claims about an ‘imagined community of entrepreneurial interest’’’ sharing a particular expertise (Jessop and Sum, 2000:
2291). In the Netherlands, PLC expansion fits into a national identity of water management expertise, as expressed in the adage:
‘‘God made the world, but the Dutch made Holland’’. Respondents
often cited the country’s special expertise in water, from treatment
technologies to flood control, to underscore their responsibility to
share their knowledge and contribute to the wider development of
the Dutch economy. In the EPM case, an entrepreneurial identity
associated with Antioquia and especially Medellín helps to justify
EPM’s activities to the population of Medellín, while sometimes
engendering a degree of suspicion in other parts of Colombia
(Álvarez, 2005).
An entrepreneurial discourse is also mobilized around the
Dutch LPCs. In 1999, the Dutch Ministry of Housing, Spatial Planning and the Environment published a book promoting the LPC
as an alternative to PSP under the title Private Business, Public Owners (see Blokland et al., 1999). Similarly, in an interview, a WMD
manager described the Indonesian JVCs as public–private partnerships, noting that although WMD has public owners and is not
‘‘capitalist’’, it operates as ‘‘private business’’. As in the pro-privatization literature, ‘‘private business’’ is taken as synonymous with
financial sustainability, efficiency, and cost recovery. In 2011, the
government set up the ‘‘PPP facility’’ for water through the Ministry for Economic Affairs to promote ‘‘public–private partnerships’’,
where the LPCs are meant to be the ‘‘private’’ partner.
21
In 2012, the Ministry of International Affairs (MBZ) announced that funding for
water and development would increase from €156 to €254 million from 2011–2015
(Knappen, 2012: 1).
22
Interview Dutch Ministry of Foreign Affairs (MBZ), June 2013.
This discourse, which negates the public status and mandate of
the LPCs, is common across public corporations from a variety of
countries; publicness is renounced despite the obvious influences
of public shareholders and goals upon the corporations
(Anastassopoulos et al., 1985). Such enterprise discourses serve
to construct particular realities, eventually constraining the scope
for action (Leflaive, 2011). The question remains as to what purpose such rhetoric serves. For Castells, the state’s engagement in
social reproduction is always with a view to creating new opportunities for private accumulation (Castells, 1972). Thus, social housing is provided to those able to pay a monthly (albeit reduced) rent.
This type of constraint can also be seen in the LPC projects. Still, the
effect of approaching social reproduction through the lens of commercial entrepreneurship is a neglect – on the part of the LPCs – of
the important ways in which their activities differ from those of
private enterprise, resulting in project outcomes sometimes made
tenuous by a lack local support. Even if social entrepreneurialism is
bound up with commercial goals, it is unlikely to be achieved by
the same means.
A variety of issues that can affect the entrepreneurial projects
are missed when their mixed social and commercial character is
not recognized. These include dissonance between the water discourses of the home and host countries, the condition of the local
infrastructure, the strength of local institutions, and the relationships between the various groups involved in and affected by the
project. For example, while the ‘‘business’’ discourse may be
encouraged in the Netherlands, it can pose problems abroad. When
NGOs state that WMD is public in the Netherlands but operates as
if it were private in Indonesia, they are making a critique (e.g.
Amrta, 2006). With respect to physical and institutional infrastructure, in a report on WMD’s experiences in Indonesia, researchers
underscored that the projects faced important setbacks due to
insufficient regulatory oversight in Indonesia as well as a lack of
preparation for the technical and socio-political realities on the
ground (TWD, 2009: 7–8).23
EPM has difficulty expanding internationally for similar reasons.
Staff emphasize the difficulty of finding the right combination of
factors abroad. This means a strong regulatory environment (to
protect their investment) and poor water services (i.e. a need for
their expertise). According to respondents, poor institutional infrastructure renders investing in physical infrastructure too uncertain
for recovering their investment, for successfully improving services,
and for protecting their reputation.24 Similarly, in the Dutch case,
the LPCs are reluctant to engage where local political support or
the engagement of local staff are weak; they fear ‘‘wasting time with
projects which will not deliver good results’’ and thereby risking their
reputation (Martins de Andrade, 2010: 92).
Consequently, EPM decided that the safest bet was on poorly
serviced areas in Colombia with whom they share a strong regulatory environment. Yet, even within Colombia, expansion presents
challenges. Having bid for supply contracts, EPM found that corruption in many municipalities renders operations contracts
unsound even domestically.25 As one respondent noted, ‘‘water is
the most complicated business in Colombia, and it even more complicated outside of Colombia’’.26 To circumvent these issues, EPM
opted to engage where they can gain control of the local utility.
The central government has encouraged this by creating a legal
framework for regional JVCs (Decreto 1248 de 2004). Like WMD’s
JVCs, these have met with criticism from local partners. One reason
is the perception of EPM as a corporate extension of Medellín’s
economic power (Bonilla, 2014).
23
24
25
26
Interview MBZ, June 2013.
Interviews, EPM, several departments, June 2010 and May 2011.
Interview EPM, Aguas Nacionales, May 2011.
Interview, EPM, general management, June 2010.
K. Furlong / Geoforum 58 (2015) 195–207
Thinking about urban entrepreneurship – social and commercial?
The geographical focus of EPM’s and WMD’s expansion complicates the association of their activities strictly with commercial
entrepreneurialism. For water supply, it is widely accepted that
rural and low-income urban areas in the South are unattractive
for private sector involvement (Budds and McGranahan, 2003).
Bakker places the minimum population for a commercially successful water supply project at 500,000 (Bakker, 2003). Researchers
and heads of companies like Vivendi agree that the financial risk is
too high for the private sector to invest in underserved areas
(Budds and McGranahan, 2003). Thus, contrary to private sector
experience, both EPM and WMD expressly focus their activities
where infrastructure is deficient, economies of scale are poor,
and the ability to pay is nominal. ‘‘Cherry-picking’’ does not
describe their expansion.
Recalling Austin et al. (2006), social entrepreneurship differs
from commercial entrepreneurship in its geographic focus. It targets areas that would normally be shunned by commercial entrepreneurs. For EPM, despite their commercial rhetoric, their sites
of expansion – and investment – are in areas of low population
and often high incidences of poverty (Fig. 2). EPM management
and staff express a sense of responsibility to improve services
and standards of living in underserviced parts of Antioquia. WMD’s
projects follow a similar geography (Fig. 4). In an interview with
WMD, the respondent noted ‘‘Manado for us is rather big,
500,000 inhabitants in the town.’’ That is, they are usually well
below Bakker’s commercial threshold.
However, while focused on social reproduction, the LPCs are
also engaged in commercial exchange. WMD is concerned with
recovering its investment (the ‘‘not for profit, not for loss’’ model)
– a type of entrepreneurialism identified by Schumpeter as ‘‘faisant
ni bénéfice ni perte’’ (Schumpeter, 1983: 46) – and EPM with making a profit (eventually). This should limit the geographies in which
they can engage. Indeed, both WMD and EPM are preoccupied by
the strength of a given regulatory environment and by corruption.
Yet, rather than avoiding areas that lack the institutional capacity
to protect their investment (and reputation), the LPCs have focused
on control and time.
Control is meant to enable them to achieve the desired results
in terms of service improvements, service extension, and rate collection. It is to be achieved by setting up JVCs in which they are the
majority shareholders, in the hopes of making them immune to
shifts in local political priorities. In terms of project duration,
EPM does not anticipate recovering its investment in the regional
JVCs for up to four decades. EPM argues that the fact that they
are ‘‘there to stay’’ distinguishes them from private operators
who are under pressure to recover investment (and turn a profit)
within a given contract period. Moreover, initial investment comes
from government grants. Of the approximately $US 100 million in
planned investment in Aguas de Urabá, about 21% was in the form
of government grants (see EPM, 2009).
The LPCs’ focus on project control and long-term involvement
betrays thinking that is biased by ideas of commercial entrepreneurialism. In this view, project outcomes rest with the ‘‘entrepreneur’’ and its capacity to achieve the desired goals in a given set of
circumstances. An engagement with social entrepreneurialism,
however, tells us that diverse relationships, broad collaboration
and even ‘‘bricolage’’ are central to meeting goals in complex political, economic and regulatory conditions (e.g. Smith and Stevens,
2010).
This is borne out by EPM’s own experience. In a recent study of
Aguas de Occidente, EPM’s JVC in western Antioquia (Figs. 1 and 2),
Bonilla concludes that despite significant technical improvements,
the project remains vulnerable (Bonilla, 2014). It is technically,
but not socially sustainable. From 2007 to 2012, they reached 99%
205
coverage on water, 83% on sewer (up 11%), and decreased leakage
by 16% (Aguas de Occidente, 2013; Restrepo, 2009). Yet, a survey
conducted with residents and interviews with municipal staff
revealed a consistently negative view of EPM. Respondents complained that government support for water and sanitation is now
controlled by EPM (via Aguas de Occidente), leaving the municipalities excluded from the project. While EPM typically focuses on
building local trust by demonstrating rapid improvements in service quality, Bonilla’s interviews show that a project’s sustainability
ultimately requires a willingness to engage the variety of groups
affected by the shift in governance (Bonilla, 2014). In some of the
other JVCs, the challenges have been both technical and social.
WMD’s experiences in Indonesia have much in common with
those of EPM. First, following its initial experiences in Indonesia,
WMD and the DGIS, which funds the projects, decided that longer
projects were necessary to achieve the desired outcomes on infrastructure, water loss control, and new connections. Consequently,
the four most recent JVC agreements are for 15 years (Fig. 3). After
15 years, the local partners have the option to purchase WMD’s
shares. According to WMD management, this decision rests completely with the local partners; WMD is prepared to stay or withdraw, as requested.27 Like EPM, WMD also came to the conclusion
that they needed project control to achieve the desired results – as
well as to secure loans that would not be granted to their local
partners.
However, as with EPM, time and control are proving insufficient
to achieve the desired service improvements. A key reason appears
to be an inattention to their relationships with key actors. Indeed,
too much control can discourage the development of good working
relationships and technical success in turn.28 An evaluation of the
WMD projects found that WMD’s control over the JVCs actually
caused problems because it fostered disengagement on the part of
the local partners and diminished their sense of ownership. The
intention was for WMD to significantly improve infrastructure in
the first 5-years, and then to progressively return control to the local
partners. Not ‘‘having an equal relationship with your partner’’ from
the outset, however, is now understood to have hindered infrastructure improvements. From 2007 to 2012, the projects led to modest
improvements in coverage (about 10% of their target) and leakage
(NRW) for some JVCs, and decreases for others (Fig. 4). They also
resulted in important increases in water rates (Fig. 4).
An example of the above issues is WMD’s reliance on its subsidiary Inowa Prima Consult PT for technical consulting (Fig. 3).
Inowa is 100% controlled by WMD and was set up as the sole provider of technical services to the JVCs. JVC partners were critical of
not having a choice of consultant as well as the cost of Inowa’s services and its impact on their increasing debt to WMD. This caused
strain in the relationships between WMD with its local partners.
However, Inowa was just one example of a generalized problem
whereby the partners experienced a lack of control over decision-making combined with a responsibility for the debt incurred
as result of those decisions.
In response, WMD has worked to reduce the economic burden
of its investments on the JVCs. It converted part of its investment
to grants and it reduced the interest on the remaining portion.
The interest on loans is now determined by the Foundation for
East-Indonesian Water Projects (SWOI). In 2011, it was set at
3.5% (SWOI, 2012). Moreover, like EPM, WMD has come to the
conclusion that cost recovery is inappropriate early in a project.
Raising prices in very low-income areas to fund service improvements is now seen as flawed. In response to WMD’s challenges,
27
The local municipalities would have to buy WMD’s shares. According to WMD,
this money would be reinvested in other water projects in Indonesia.
28
The information below is based on an interview with the MBZ (June, 2013), a
report on WMD’s projects, as well as WMD’s own reports (WMD, 2013).
206
K. Furlong / Geoforum 58 (2015) 195–207
the Ministry of Foreign Affairs (MBZ) concludes that the JVCs need
to engage with a broad range of partners, including NGOs and communities, to improve results and that success depends on an
awareness of the local cultural and political context. This reflects
recent research in Indonesia, which finds that a variety of actors
including users face deterrents vis-à-vis water supply extension
resulting in ‘‘governance failure’’ (Bakker et al., 2008); engaging
in social reproduction cannot be reduced to commercial forms of
entrepreneurialism.
Conclusions
Public corporations are faced with increasingly mixed mandates. While government owners push public corporations, including water-LPCs, to serve both social and commercial functions, the
two roles often prove difficult to reconcile (Rousseau, 2013;
Vallespín and Gianfelici, 2011). This tension is often left unexplored in the literature that treats LPC reforms through a primarily
commercial lens. A focus on commercialization is important, especially in the context of ongoing neoliberalization (see Bakker,
2013). Yet, it often overlooks the ways in which social reproduction
and collective consumption condition reforms. They are not simply
subject to reform; they are factors in reform. How this works may
be mediated by the distinct political ecologies of water, but the
point remains of relevance to other services.
By taking an approach to urban entrepreneurialism that
engages with social reproduction and consumption, it is argued
that a richer understanding of the contradictions inherent in using
water supply as a vehicle for economic growth can be achieved. At
the same time, an engagement with water supply suggests a
broader way of approaching urban entrepreneurialism. This
includes an engagement with issues of social reproduction (in
mediating commercial reforms) as well as with Schumpeterian
forms of entrepreneurialism, as suggested by Jessop and Sum
(2000). This insight may be of increasing relevance for studies of
urban entrepreneurialism where researchers find a growing
emphasis on elements of collective consumption in ‘‘selling’’ cities.
For EPM, WMD and the governments that support their initiatives, in failing to understand their projects beyond a commercial
lens, models of growth are applied that often clash with local
actors. Instead of insisting on their corporate character, the utilities
would benefit from the recognition that they are a long way from
mimicking their private counterparts when they seek to increase
social value in advance of shareholder profit, when they operate
in locations where commercial entrepreneurship is not feasible,
and when project control is an insufficient substitute for local
engagement. The assumption that commercial management is
the sine qua non of achieving quality services hinders service
improvements. Recognizing that commercial entrepreneurship is
reserved for very specific sets of conditions would help to better
understand its limitations for water supply, especially in cases
where populations have been traditionally excluded from government programs of social reproduction and collective consumption.
Acknowledgements
I would like to thank Catalina Bonilla Agudelo and Sebastian
Caranza for their work on the EPM database, as well as Marc Girard
and Nathalie Désilets for their work on the images. I would also to
express my appreciation to Anna Sofía Uribe P. and Evelio Gomez
for their insights and hospitality in Medellín, and the helpful comments of the anonymous reviewers. This research was funded
through the FQRSC Établissement de nouveaux professeurschercheurs funding program as well as a SSHRC Insight Grant.
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