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Public Citizen to World Bank: Practice What You Preach

April 13, 2005

Public Citizen to World Bank: Practice What You Preach

Consumer Group Urges Bank to Treat Water as a Human Right, Not a Commodity

WASHINGTON, D.C. – As the World Bank convenes for its spring meetings this week, Public Citizen today cautioned that incoming President Paul Wolfowitz’s past dealings with a private water contract in Iraq could negatively influence the Bank’s detrimental policy of tying water privatization clauses to loans for developing countries.

As the architect of Iraq’s reconstruction following the 2002 invasion, then-Deputy Secretary of Defense Wolfowitz was behind the privatization of essential services in the country, particularly in the water sector.  San Francisco-based Bechtel received a $1 billion contract to oversee the rehabilitation, reconstruction and expansion of key elements of Iraq’s infrastructure, including municipal water delivery and wastewater systems. The contract, which has been extended to December 2005, was part of a limited bidding process that forbade public review and was initially kept secret from Congress.

Last year, Public Citizen published a report on the state of Iraq’s water sector, namely, that the country’s water system was a disaster because Bechtel had not fulfilled its obligations spelled out in the contract.

“We’ve seen just how bad Mr. Wolfowitz’s judgment has been when it comes to delivering water to the people of Iraq,” said Wenonah Hauter, director of Public Citizen’s Water for All Campaign.  “Let’s hope it’s a hard lesson learned – and that the World Bank does not follow in his misplaced footsteps.  Now is the time for the World Bank to reconsider its water privatization policies and change course.”

In the past decade, in collaboration with governments and regional development banks, the World Bank has pushed water privatization and promoted multinational water corporations in many countries across the world as the answer to water and sanitation problems. As a result, the global water industry has become highly concentrated, with three major multinational corporations controlling more than 40 percent of the private water market.

The World Bank’s promotion of water privatization has led to unaffordable water rates, public health crises, weak enforcement of drinking water standards, a lack of compliance with contractual commitments for investment, and lost jobs in places where private contractors have replaced government workers.    As affordable access to essential services, such as water, are increasingly out of reach, waves of protest are spreading across Africa, Latin America and Asia.

Despite the World Bank’s public insistence that it is no longer tying privatization clauses to loans, in the past three years, the institution has increased lending in the water and sanitation sector from $546 million in fiscal year 2002 to more than $3 billion in fiscal year 2005. This means increased pressure on World Bank staff to push larger loans faster to meet the funding targets.

Public Citizen tracks the World Bank’s lending policy through “project information documents,” which are prepared prior to loan approval.    The Bank’s public relations rhetoric was also analyzed in Public Citizen’s 2004 report Will the World Bank Back Down? Water Privatization in a Climate of Global Protest, which found the World Bank publicly shifted its rhetoric away from full-scale privatization in the face of increasing global resistance, but meanwhile continued to mandate water privatization in nearly all its loans.  In a review of 51 countries using World Bank loans, 91 percent of loans included water privatization clauses in 2000; in 2004, 100 percent of loans included such clauses.

“It’s apparent the World Bank says one thing, but does another,” said Hauter.   “As we watch city after city revolt against these forced privatization schemes, it’s important that the Bank is reminded that the public does not support its disastrous business model.”

In a collaborative effort among citizens groups from around the world, a new list of demands for the World Bank has been developed.   Among them, that the Bank:

  • Fully recognize the human right to water in all Bank policies related to water and sanitation;
  • Remove all conditions, implicit or explicit, that require full cost recovery from household water users;
  • Remove all conditions, implicit and explicit, that require public/private partnerships for governments to access loans;
  • Cease loans that promote the reform of national water laws to permit and protect private sector participation and increased cost-recovery; and
  • Work to strengthen the role of the public sector and encourage meaningful participation of civil society and affected communities.

To read about World Bank Watch, Public Citizen’s project to monitor proposed World Bank lending in the water and sanitation sector, click here.   To learn more about the Water for All Campaign, click here.