In the run-up to the 2014 edition of its annual spring meeting, the World Bank Group held a four-day dialogue in Washington, D.C. Along with the World Bank Group Staff, groups from around the world convened to discuss numerous topics, including the privatization of water.
It’s hard to think of a more important topic. We face a global water crisis, made worse by the warming temperatures of climate change. A quarter of the world’s people don’t have sufficient access to clean drinking water, and more people die every year from waterborne illnesses than from ALL forms of violence (including war) combined. Every hour, the United Nations estimates that 240 babies die from unsafe water.
The World Bank Group pushes privatization as a key solution to the water crisis. It is the largest funder of water management in the developing world, with loans and financing channeled through the group’s International Finance Corporation (IFC). Since the 1980’s, the IFC has been promoting such water projects as part of a broader set of privatization policies, with loans and financing tied to enacting austerity measures. But international advocacy and civil society groups point to the poor record of private-sector water projects, and are calling on the World Bank Group to end support for water privatization.
In the decades since the IFC’s initial push, we have seen unshakable proof that water privatization DOESN’T WORK. Water is not like telecommunications or transportation. You could tolerate crappy phone service, but if you have faulty pipes connecting to your municipal water then you’re in REAL trouble.
“Water is a public good for which inequality has to fall within a certain range — or it means life and death,” said SHAYDA NAFICY, director of the International Water Campaign at Corporate Accountability International (CAI). “When the private sector engages in water provision, greater disparities in access and cost follow.”
Water is also different because it requires such huge and ongoing infrastructure investments. An estimated 75% of the costs of running a water utility are for infrastructure alone.
The track record of publicly funded private water projects shows that the private sector doesn’t find it profitable to invest in the infrastructure that is really needed to ensure that communities have access to clean and affordable water. “Water companies have found that their niche is seeking efficiency solutions through hiking prices and cutting spending on infrastructure investment,” said Naficy.
Even as the World Bank Group continues to promote water privatization, its own data reveal that a high percentage of its private water projects are in distress. Its project database for private participation in infrastructure documents a 34% failure rate for all private water and sewerage contracts entered into between 2000 and 2010, compared with a failure rate of just 6% for energy, 3% for telecommunications and 7% for transportation, during the same period.
A look at projects deemed “successes” by the World Bank Group proves that they are very not experienced in the field. An IFC-funded private water project in central India’s largest city, Nagpur, for example, is the country’s first “full city” public-private partnership [English translation]and has raised serious concerns among local residents. Worries range from high prices to project delays to unequal water distribution and service shutdowns. Allegations of corruption and illegal activity have led residents to protest, and city officials have called for investigations of contract violations.
“In the last three years, the cost of operation and maintenance of the system has increased drastically and the price of water has increased manyfold,” said JAMMU ANAND of the Nagpur Municipal Corporation Employees Union in a statement released by CAI.
What water privatization advocates like Naficy and Anand remind us is that significant and steady infrastructure investment is the only way to foster safe, affordable and dependable water supplies, and that is done more effectively by the public sector than by private corporations. Water systems need treatment facilities and a mechanism to channel water from its source in a stable way (usually through pumps piping water to households and individual connections from main pipes) to households. According to Naficy, “There is no end run around building a strong public sector and building strong public oversight.”
In addition, financing by the IFC, which is both investor and adviser on these projects, poses a conflict of interest. On the one hand, the IFC is advising governments to privatize the sector; on the other, it’s investing in the corporations who are getting those contracts. “It’s self-dealing: setting up a project that it’s in a position to profit from,” said Naficy. When the IFC was established in 1956, it was expressly prohibited from purchasing corporate equity to avoid this sort of conflict, but the board amended this rule a few years later, allowing these kinds of deals. The IFC insists that there are interior barriers to such conflicts of interest, even as its own annual report touts “client solutions that integrate investment and advice.”
Independent water advocates point to India as evidence that privatized systems lead to underfunded infrastructure and unpredictable, often high prices. The IFC defends the private sector by claiming that these companies offer “efficiency gains”. But those gains come at the expense of lower-income households as companies increase rates to subsidize their own profitability.
There’s a growing backlash against these projects. In 2000, protests erupted in Bolivia’s third-largest city in response to the privatization of the city’s municipal water supply and against the multinational water giant BECHTEL, eventually pushing the company out of the country. The IFC’s own complaint mechanism reports that 40% of all global cases from 2013 were about water, even though water projects are only a small fraction of what the IFC funds. In 2013, CAI and 70 advocates from around the globe released an open letter to the World Bank Group calling for an end of all support for private water, beginning with IFC divestment from all equity positions in water corporations.
“Corporations don’t have a social or development mission,” said Naficy. “Right now we’re funding development to prop up private projects, instead of putting the decisions for funding in the hands of governments that are accountable to people.”
Clean and affordable water is the basis of life. Problems such as skyrocketing water prices, unsafe supply and failing infrastructure fall disproportionately on the most vulnerable among us. This is why public institutions, not private corporations, must lead the development of water systems and delivery. The World Bank Group is uniquely positioned to increase access to clean water for the billions who need it. Instead of using its position to line the pockets of water companies, it should support what is most needed: affordable and clean public water for all.
~ MERIT FREEMAN