Water privatisation? Finland says no!

In early January 2020, the municipality of Jyväskylä, located in the Central Finland Region, announced its intention to part-privatise between 30 and 40 per cent of its multi-utility company Alva, including water, energy and heating. Bringing in expertise from the private sector would better equip the company to tackle current market challenges, the municipality stated. Moreover, mirroring water privatisation arguments elsewhere, privatisation was said to promise increased efficiency and lower consumer prices. However, the announcement led to an immediate public outcry. Several critical opinion pieces appeared in various Finnish daily newspapers, and activists from the Left Alliance party launched a public petition to push the Finnish parliament into action. On 10 February, Jyväskylä announced that it had withdrawn its proposal. In this post, Dominika Baczynska Kimberley and Andreas Bieler trace the dynamics underlying this quick turnaround.

It all started with a misunderstanding. Misleading headlines in Finnish daily newspapers, which became further amplified via social media, suggested that the municipality planned to sell 100 per cent of its water services company. Many drew an immediate parallel to state-owned energy company Fortum’s sale in 2014 of its energy network to Caruna—a large private company with foreign shareholders—which had resulted in drastic increases in electricity transmission prices.

The common consensus was that when it comes to natural monopolies such as water, the public ought to retain ownership of infrastructure rather than lose control to large private—and potentially foreign—companies. Commentators, moreover, pointed to similar water privatisation experiences in the Estonian city of Tallinn in 2001, when a 50.4 per cent sale of water was made. Despite claims of increased efficiency and lower prices, the deal led not only to enormous corporate profits for foreign shareholders and higher prices for consumers (which only went down last year), but also to significant layoffs, as a third of the staff was made redundant and senior management replaced by British executives.

Becoming aware of the wider public uproar over the assumed privatisation of water services in Jyväskylä, activists from the Left Alliance launched a public petition. Six years ago, the tool of public petitions was implemented in Finland to increase civic engagement in political decision-making processes. Since then, an average of two petitions have been filed per year. A petition needs to be submitted by a minimum of five citizens, and provided it secures 50,000 signatures within six months, it is submitted to Parliament for consideration. The petition ‘The Water is Ours’, was launched on 31 January, and within two days had already exceeded the required quota, totalling at an impressive 89 179 signatures. Clearly, the issue of water privatisation had struck a chord with the Finnish people.

‘We have received support from all the parliamentary parties including the right-wing Finns Party’, the Left Alliance activist and petition initiator Vesa Plath told us in an interview. As Plath also explained, petitions require good campaigning and networking skills. Critically, the colours chosen for the petition were black and blue, rather than the Left Alliance’s red, thus signalling political neutrality. In other words, the petition was not presented as a political party initiative, but rather as a universally applicable humanitarian good cause. Much like elsewhere in Europe, water proved to be an issue that cuts across political party lines. For instance, even those who typically vote for centre-right or even right-wing parties adamantly argue that water, being a natural monopoly and vital source of life, should not be subject to profit making. Similarly, the Greens emphasise the importance of public ownership of water in relation to equality and environmental sustainability. The petition was officially presented to parliament for consideration on 23 March 2020, and the government has signalled that it will work on legislation to secure the public ownership of water.

Opposition to water privatisation has a tradition in Finland. In 2012 and 2013, the Right2Water coalition of trade unions and civil society organisations collected almost 1.9 million signatures across the European Union in the first successful European Citizens’ Initiative ‘Water and Sanitation are a Human Right’, which opposed the liberalisation of the water sector. Finland was one of the 13 countries, which met the required national signature quota (see also Fighting for Public Water in Europe: The ECI Water is a Human Right). 

The water story in Jyväskylä, however, goes further back than the beginning of this year. In 2005, the municipality sold its water services to its energy company for 150 million euros. The deal resulted in profits for the seller, the municipality, as well as increased book value of fixed assets for the buyer, again the municipality. While promised ‘synergy benefits’ as a result of this in-house deal never materialised, water became subordinated to the municipal energy company. Moreover, in subsequent years, the annual surpluses of the multi-utility company were used to pluck holes elsewhere in Jyväskylä’s municipal budget.

The real challenge is not so much the water company itself, but the need to secure finance now to invest in renewable energy facilities. As Alva had been unable to build up reserves, the part-privatisation was intended to raise the necessary finance for this investment as well as bring in private expertise for the management of boosting the renewable energy sector.

Interestingly, as a reaction to public discontent regarding the privatisation plans, Jyväskylä considered breaking up Alva into its various parts, thereby only part-privatising the electricity company. However, it quickly became apparent that international investors were no longer interested, thus revealing that it had been the water services (with their guaranteed stream of profits) which had been the real investment incentive for the private sector.

The case of Jyväskylä, therefore, reflects the much deeper problem of high indebtedness of smaller rural Finnish municipalities in particular, which struggle to invest in essential public services. Indeed, some smaller municipalities such as Viitasaari in 2018 have already sold their public water companies to larger municipalities’ public water companies, while others are forced to consider doing so, such as Ähtäri today. Rather ironically, such deals often result in a similar loss of autonomy for the smaller parties as under de facto privatisation—a phenomenon largely overlooked by mainstream media. Ultimately, while water privatisation may well be stopped in Finland, arguably the wider problem of proper funding of public services will persist.

Dominika Baczynska Kimberley is a research assistant at the Helsinki Collegium for Advanced Studies. She is currently a student in the Master’s Programme in English Studies at Helsinki University. Her areas of interest include international relations and politics, human rights, and environmental sustainability.

Andreas Bieler is Professor of Political Economy at Nottingham University, UK and currently a Core Fellow at the Helsinki Collegium for Advanced Studies, Finland.

This post was first published on the website of the European Water Movement on 30 March 2020.