Geoforum 38 (2007) 772–785 www.elsevier.com/locate/geoforum 0016-7185/$ - see front matter  2006 Published by Elsevier Ltd. doi:10.1016/j.geoforum.2006.08.012 ProWtability and the poor: Corporate strategies, innovation and sustainability  David Hall ¤ , Emanuele Lobina Public Services International Research Unit, Business School, University of Greenwich, Park Row, Greenwich, London SE10 9LS, United Kingdom Received 10 August 2004; received in revised form 16 August 2006 Abstract Based on empirical evidence, the article looks at the implications of private sector participation (PSP) for the delivery of water supply and sanitation to the urban and peri-urban poor in developing countries, with particular reference to Africa and Latin America. More precisely, the article addresses the impact produced by multinational companies’ (MNCs) strategies, in light of the pursuit of proWtability, on the extension of connections to the pipeline network. It does so by questioning the assumptions that greater private sector eYciency and innovation, together with contract design, will enable the sustainable extension of service coverage to low income dwellers. The strat- egies of the major water MNCs are considered both in relation to the global expansion of their operations and the adjustment of local strategies to commercial considerations. The latter might result in identifying proWtable markets, modifying contractual provisions, attempting to reduce costs and increase income, reducing risks and exiting from non-performing contracts. The evidence reviewed allows for re-assessing the relative roles of the public and private sectors in extending and delivering water services to the poor. First, the most far reaching innovative approaches to extending connections are more likely to come from communities, public authorities and political activity than from MNCs. Secondly, whenever MNCs are liable to exit from non-proWtable contracts, the public sector has no other option than to deal with external risks aVecting continuity of provision. Finally, market limitations aVecting MNCs’ ability to serve mar- ginal populations and access cheap capital do not apply to well-organised, politically led public sector undertakings.  2006 Published by Elsevier Ltd. Keywords: Water supply and sanitation; Private sector participation; Multinational companies; Corporate strategy; Poverty; Access to pipeline network; Market failure; Public sector; Latin America; Africa 1. Introduction: why private sector? In the 1990s arguments have been advanced for expect- ing the international private sector, that is to say multina- tional companies, to provide a better solution to extending water supply to the poor in developing countries. They refer to the three private sector virtues of eYciency, Wnan- cial capacity, and proactive management which operates by matching the service supplied with the eVective demand of the poor, as concisely summarised by Franceys (1997): “Private sector participation is seen to increase eYciency and introduce new sources of Wnance but above all to require a new emphasis on proactive, per- formance oriented, commercial management that aims to match the demand of its customers with their willingness to pay realistic charges and tariVs”. 1  Company names: The French groups in particular have used various names for both the groups and the water sections since 1990. Throughout this article, for the sake of clarity, the two largest groups will be referred to as ‘Suez’ and ‘Veolia’, even when referring to dates before these names were formally used; the next two will be referred to as ‘Thames’ and ‘SAUR’. The principle names associated with these groups are: Suez D Lyonnaise des Eaux; Ondeo. Veolia D Generale des Eaux; Vivendi. * Corresponding author. E-mail addresses: d.j.hall@gre.ac.uk (D. Hall), e.lobina@gre.ac.uk (E. Lobina). 1 Richard Franceys: Private Sector Participation In The Water And Sanitation Sector ‘Private Waters? – A Bias Towards The Poor’ Depart- ment For International Development Occasional Paper No 3 1997.