Humans
can survive weeks without food, but only days without water — in some
conditions, only hours. It may sound clichéd, but it’s no hyperbole:
Water is life. So what happens when private companies control the
spigot? Evidence from water privatization projects around the world
paints a pretty clear picture — public health is at stake.
In the run-up to its annual spring meeting this month, the World Bank
Group, which offers loans, advice and other resources to developing
countries, held four days of dialogues in Washington, D.C. Civil society
groups from around the world and World Bank Group staff convened to
discuss many topics. Water was high on the list.
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 — such as cholera and typhoid fever — than from
all forms of violence, including war, combined. Every hour, the United
Nations estimates, 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 1980s, the IFC has
been promoting these water projects as part of a broader set of
privatization policies, with loans and financing tied to enacting
austerity measures designed to shrink the state, from the telecom
industry to water utilities.
But international advocacy and civil society groups point to the
pockmarked record of private-sector water projects and are calling
on the World Bank Group to end support for private water.
In the decades since the IFC’s initial push, we have seen the results of
water privatization: It doesn’t work. Water is not like
telecommunications or transportation. You could tolerate crappy phone
service, but have faulty pipes connecting to your municipal water and
you’re in real trouble. Water is exceptional.
Private sector priorities
“Water is a public good,” Shayda Naficy, the director of the International Water Campaign at Corporate Accountability International (CAI),
told me, “for which inequality has to fall within a certain range — or
it means life and death.” 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 percent 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 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,” Naficy told me.
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 percent failure rate for
all private water and sewerage contracts entered into between 2000 and
2010, compared with a failure rate of just 6 percent for energy, 3
percent for telecommunications and 7 percent for transportation, during
the same period.
A look at projects deemed successes (PDF)
by the World Bank Group shows they are not experienced that way on the
ground. 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 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,” Jammu Anand of the Nagpur Municipal Corporation Employees
Union said in a statement released by CAI. (CAI details other examples
like this one from Nagpur in its 2012 report “Shutting the Spigot on Private Water: The Case for the World Bank to Divest.” Full disclosure: I am a strategic adviser to CAI.)
What advocates, including Naficy and Anand, are reminding the IFC today
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 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 getting those contracts. “It’s
self-dealing: setting up a project that it’s in a position to profit
from,” Naficy told me. 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 there are interior
barriers to such conflicts of interest, even as its own annual report
touts “client solutions that integrate investment and advice.”
Opening up the spigot
Independent water advocates, from CAI to Anand’s group in India and others including the Focus on the Global Southnetwork,
point to India today 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 (PDF).
But those gains come at the expense of lower-income households,
advocates such as Naficy point out, as companies increase rates to
subsidize their own profitability.
There’s a growing backlash against these projects. In 2000, headlines around the globe documented
protests 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 percent
of all global cases from last year 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 (PDF)
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,” Naficy told
me. “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. Skyrocketing water
prices, unsafe supply, failing infrastructure — these problems 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, clean — and public — water for
all.
