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World Bank Water Privatization Policies Benefit Corporations, Not Developing Countries

Sept. 25, 2002

World Bank Water Privatization Policies Benefit Corporations, Not Developing Countries

Privatization Should Not Be a Condition of Loans, Report Says

WASHINGTON, D.C. – The World Bank has engaged in a multi-pronged effort to promote a water policy that benefits large multinational corporations at the expense of poor people in developing countries, according to a Public Citizen report released today.

World Bank policies impose a “market price” for water in poor countries and contribute to increasing rates of cholera and other waterborne diseases, the report said. The World Bank claims that its goal is to alleviate poverty, but its loan policies are at odds with this objective. The report recommends that World Bank loans focus on increasing access to water and sanitation services in low-income and underserved areas, rather than relying on full cost recovery and water privatization.

Not only has the World Bank required countries to privatize water services as a condition of receiving loans, but the Bank has engineered the creation of public utility regulatory bodies that lend credibility to the Bank’s pro-corporate water policies. Further, the Bank has launched an orchestrated public relations effort to promote the idea that water is a commodity, not a human right. To this end, the Bank has joined water companies and government development agencies to create a broad array of organizations that hold conferences, have task forces, release vision statements and distribute glossy publications. These groups often co-opt the social and environmental principles espoused by non-governmental organizations about access to clean and affordable water as a basic human right.

“As private companies started to view water as a lucrative natural resource, much like oil or gold, the concept of commodifying water was born,” said Wenonah Hauter, director of Public Citizen’s Critical Mass Energy and Environment Program. “In the past decade, we have seen the provision of water services pushed into the hands of fewer and larger multinational corporations. At the same time, poverty and disease levels have risen in developing countries.”

The World Bank policies that are most harmful promote the privatization of water utilities, which creates lucrative new business opportunities for major global water corporations, and “full cost recovery,” which refers to the collection of fees from consumers for the full cost of the operation and maintenance of water utility services.

These are part of the World Bank’s standard policy that promotes privatization, deregulation, trade liberalization and fiscal austerity. It was largely instituted in the past 20 years when the promotion of privatization mirrored the global trend toward more market-oriented economic policies. But critics say this market-oriented slant benefits major corporations such as French-owned water giants Vivendi Universal and Suez, and furthers inequality in the developing world. Indeed, prior to the 1980s, World Bank economists and development experts maintained that investment in public water utilities would trigger a development “take off.” However, the scale shifted when investors began to realize the potential profit from privatizing an increasingly scarce natural resource.

The World Bank now claims that the private sector, rather than publicly owned water utilities, is best able to provide the financial resources and expertise needed to address the growing problems in water service management. Yet private sector companies are organized to make a profit, not to fulfill socially responsible objectives such as achieving universal access to water and sanitation services. In many developing countries, where most citizens earn less than $2 a day, private sector companies are unable to meet shareholder obligations to provide a market rate of return and also implement universal coverage with acceptable quality and at affordable prices. Water rates soar and large sectors of the low-income population remain unserved.

“When water becomes more expensive, and therefore less accessible, it creates a public health crisis,” said Sara Grusky, report author and coordinator of the International Water Working Group. “If people cannot afford clean water, they resort to using water from polluted streams and rivers, which increases the risk of many waterborne diseases like cholera.”

For example, in Ghana in May 2001 after the International Monetary Fund (IMF) and World Bank policies led to an increase in water fees, three buckets of water cost a family almost 20 percent of the daily minimum wage.

In 2001, 50 percent of World Bank loans required countries to privatize services and more than 80 percent of the loans contained cost recovery requirements.

To quell the growing public concern about privatization, the World Bank often calls its policies “public private partnerships.” Water companies enter into a lease with a country under the most profitable conditions possible, which often don’t burden the company with the responsibility of infrastructure investment costs.

“The shared agenda between the World Bank and the global water giants is just one more example of corporate interests overriding basic human needs and livelihoods,” said Hauter.

To view the report online, please click here.