World Bank Supports Harmful Water Corporations’ Privatizations that Hurt the World’s Poorest

Johanna Treblin

Inter Press Service

16 April, 2012

“According to CAI, funding the privatization of water hurts the world’s poorest and can also have negative effects on water access and human rights.”

People in many developing countries often lack access to clean water, but the approach to remedy this problem has shifted in recent years to rely more on the private sector. Yet, as this new report and several other watchdog groups have shown, the change has been more harmful than helpful.

Corporate Accountability International, the U.S.-based non-governmental organization that published the report, has called on the World Bank to stop funding the private water sector and start redirecting its money to public and democratically accountable institutions.

The World Bank's private sector arm, the International Finance Corporation (IFC), has spent 1.4 billion dollars on private water corporations since 1993, according to the report.

As of January 2013, that investment will increase to 1 billion dollars per year. The report also says that the IFC is attracting 14 to 18 dollars of follow-up private investment for every 1 dollar it directly invests.

This money helps explain why the World Bank and the IFC continue to fund private water corporations, even though roughly one third of all private water contracts signed between 2000 and 2010 have failed or are in distress – four times the failure rate of comparable infrastructure projects in the electric and transportation sectors, according to CAI.

"A tremendous failure"

"Rather than focusing on guaranteeing access to clean and affordable water, the World Bank has promoted measures that will cost consumers more money for water," says a 2010 report from the NGO Food and Water Watch.

The high cost can also be defined in human terms. That same report pointed out how poor water quality and sanitation bring about gastrointestinal diseases and parasites that are "the leading cause of illness and death throughout the developing world".

CAI also criticizes several different conflicts of interest, such as the World Bank's ownership of water corporations while simultaneously presenting itself as an impartial advisor. Ultimately, "the World Bank has been the engine behind this corporate takeover of water systems and services," its website states.

The World Bank encourages countries to either privatize their water systems or modify pre-existing public ones with a focus on profit, says CAI. As a result, the World Bank paves the way to further privatization. It also pushes for infrastructures that offer advantages to "large corporate users over individuals and communities".

"In the midst of a world water crisis, the World Bank is squandering resources needed to save millions of lives," said Kelle Louaillier, executive director of CAI. "Its charter is to aid those in the greatest need, but its financial stake in private water corporations is creating perverse incentives which undermine the bank's own mission."

According to CAI, funding the privatization of water hurts the world's poorest and can also have negative effects on water access and human rights, such as in Manila, Philippines.

Here, the World Bank not only advised the government, but it also helped design the privatization of water there.

"Years later, many residents still don't have water, and affordability problems have gone through the roof," Shayda Naficy, CAI's water expert, said.

"The IFC is calling it a success, which it has been for its investors. But it's been a tremendous failure from the perspective of everyday residents and the right to water."