This document summarizes a presentation on the emergence of mixed ownership water firms in Italy between the 1990s and 2000s. Initial conditions included widespread public ownership of water firms. Reforms in 1994, 2001, and 2003 privatized some water firms. The first privatization to a mixed ownership firm occurred in Alto Valdarno, Tuscany in 1994-1999 due to local support. More mixed ownership firms emerged in 2001-2003 as the idea diffused and reforms created opportunities and threats. Awards also went to "in house" public firms where local control was preferred over mixed ownership. Historical context, past agreements, and policy networks influenced the rise of mixed ownership models for delivering water services in Italy.

1. Symposium
“Neither Public nor Private:
Mixed Forms of Service Delivery around the Globe”
May 17-18, 2012
School of Economics, Universitat de Barcelona
Explaining Partial Privatization:
The Emergence of Mixed Ownership Water Firms
in Italy (1990's-2000's)
Dr Alberto Asquer
Lecturer of Business Strategy and Policy
Faculty of Economics
University of Cagliari, Italy
aasquer@unica.it
Visiting Fellow
Robert Schuman Centre for Advanced Studies
Florence School of Regulation
European University Institute

2. 1. Introduction
Why do mixed ownership firms (MOF) for the provision of public
services emerge?
An answer is that MOF are selected among other design
options (e.g., full public ownership or full private ownership)
because they are expected to outperform other forms of public
service delivery.
However,
a) do MOF really outperform other forms of public service
delivery?
b) do policymakers make design decisions for the provision of
public services according to performance maximising criteria?
c) if both answers to a) and b) are “yes”, then why aren't MOF
more diffused than we actually observe?

3. 1. Introduction
MOF may result from the combined effect of various factors but
efficiency effects and concerns, such as features of the
decision-makers, status quo conditions, and particular historical
context circumstances.
This work contains an exploratory case study of the
implementation stage of the policy cycle to privatize Italy's
(drinking and waste) water sector in 1990's and 2000's.
Initial conditions included (a) diffuse public ownership of water
firms in various forms (municipal departments, municipal firms,
consortia, etc.) and (b) high fragmentation of the water industry.
Terminal conditions included (a) public ownership retained in
about two thirds of water firms, (b) MOF in about one fourth of
water firms, and (c) private ownership of a few firms.

4. 2. Theoretical background
Privatization is conceived as a component of “pro-market”
regulatory reforms, i.e., transformative regulatory reforms that
aim to radically reconfigure the regulation of entire sectors of the
economy by exposing incumbent operators to competitive
pressures, including opening up the possibility to acquire
ownership and control of key assets (e.g., infrastructure) to
companies or private investors.
Landy et al.'s (2007) Creating Competitive Markets: The Politics
of Regulatory Reform highlighted sources of resistance to the
making of competitive markets, including “governmental
protectionism” when public service providers oppose the
opening up of private sector participation to the delivery of
public services.
What about the role of sub-national governments as direct
providers of public services?

5. 3. The privatization of the water sector in Italy (1990's-2000's)
1994 2001 reform 2003 reform
water of local public of local public
reform services services
Generally, no award of water Some award Increased number of
franchises of water awards of water
franchises franchises
Water districts where especially municipal water firms operated
Award of water franchise to Various Some awards
MOF in Alto Valdarno, Tuscany awards of water
of water franchises
franchises to MOF
to MOF
Various awards
of water
franchises
to “in house” firms
1994 1999 2001 2003 2009

6. 3. The privatization of the water sector in Italy (1990's-2000's)
1994 2001 reform 2003 reform
water of local public of local public
reform services services
Generally, no award of water Some award Increased number of
franchises of water awards of water
franchises franchises
Water districts where especially municipal water firms operated
Award of water franchise to Various Some awards
MOF in Alto Valdarno, Tuscany awards of water
of water franchises
franchises to MOF
to MOF
Various awards
of water
franchises
to “in house” firms
1994 1999 2001 2003 2009

7. 4. Explaining the privatization of the water sector in Italy
Explaining the general pattern of no privatization in 1994-2001:
a) Features of the water district governance system (i.e., the
decision to award water franchises was made by local
governments), related to (i) features of the water reform statute
and (ii) features of legislation on public service provision;
b) Features of the water industry (i.e., local governments owned
and controlled local water services and water-related jobs and
public contracts were generally important for building support of
clienteles in the local politics)
c) Features of the water reform statute (i.e., water franchises
should be awarded to either private firms or MOF for serving
water districts larger than local governments' jurisdictions)
d) Features of territorial organization of water services (i.e.,
generally highly fragmented at local government level).

8. 4. Explaining the privatization of the water sector in Italy
Explaining privatization in Alto Valdarno in 1994-1999:
Distinguishing conditions in Alto Valdarno
a) Previous events (before 1994) included negotiated agreement
to consolidate and partially privatize water service provision
managed by local municipal firms;
b) Regional and local government politicians of the dominant
Democratici di Sinistra party held favorable positions towards
MOF as a way of regulating local public services;
Distinguishing conditions shared with other parts of Italy
c) Executives of water municipal firms, that enjoyed more
autonomy than managers of water municipal departments,
championed the transformation into MOF.

9. 4. Explaining the privatization of the water sector in Italy
Explaining privatization into MOF in 2001-2003:
a) Previous events (privatization in Alto Valdarno) provided
supportive evidence for the viability and beneficial effects of
MOF channelled through a policy network of water professionals
(i.e., local governments could share ownership of larger water
firms while retaining some influence on water-related activities)
(diffusion of ideas);
b) The 2001 local public services reform had changed some
design features of the water reform, especially providing
compulsory full privatization apart from the possibility to award
water franchises to MOF within 18 months deadline (opportunity
and threat);
c) Executives of water municipal firms, that enjoyed more
autonomy than managers of water municipal departments,
championed the transformation into MOF.

10. 4. Explaining the privatization of the water sector in Italy
Explaining awards to “in house” firms from 2003 onwards:
a) Features of the water industry (i.e., local governments owned
and controlled local water services and water-related jobs and
public contracts were generally important for building support of
clienteles in the local politics);
b) The 2003 local public services reform had again changed
some design features of the water reform, especially providing
the option to either fully privatize water service provision or
award water franchises to “in house” firms (opportunity);
c) Where local water services were provided by municipal
departments, local governments preferred to keep shared close
control of water service provisions while organizational features
were not favorable to MOF.

11. 5. Conclusions
Historical context conditions play an important role in the
emergence of MOF for the delivery of public services.
Relevant conditions include:
a) Initial condition of public ownership in the form of municipal
firms rather than municipal department;
b) Past events that already formed negotiated agreements about
privatizing public services in the form of MOF;
c) An active policy network of public service professionals that
help diffusing ideas about the viability and beneficial effects of
MOF for the provision of public services.
d) Changing reform statutes that open up opportunities to retain
and/or threats to lose influence on the public services.

12. Thank you