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Despite evidence, World Bank still promoting water privatisation

21 November 2011

Guest analysis by Gaurav Dwivedi, Manthan Adhyayan Kendra, India

Bank-funded private water projects across the world are facing serious financial, socio-political and operational problems, but recent trends show that more such are projects coming up.

In August, Indian policy research group Manthan Adhyayan Kendra released a detailed study of the Khandwa water project, part-financed by the International Finance Corporation (IFC), the World Bank’s private sector arm. The project is a public private partnership (PPP) sanctioned under a central government scheme for building urban infrastructure in towns. This model of urban infrastructure development through privatisation of public services, like water, is to be replicated across India. The IFC has invested $5 million out of a total PPP investment of $39 million in two water and waste water projects, including Khandwa.

The study shows that even though this is a PPP project, the majority of the funding comes from public resources, including more than 90 per cent of the capital expenditure of $28.8 million. The private operator will also charge the city for operation and maintenance under the concession agreement.

The study finds that the costs to the the city will rise exponentially once the project begins delivering water, with operating expenses increasing almost fourfold. Although the project is in the final phase of construction and will start operating shortly, it is still not clear if poor and low-income areas will be provided with piped water. There are concerns that public water standposts may be dismantled to reduce so-called water loss.

The initial project proposals show that the city wished to add several measures to them, including a 24 hour supply requirement and wider distribution. However, when the bidding and tendering began these measures were dropped to make the project more profitable and less risky.

New IFC ventures with multinational corporations

In July 2010, the United Nations General Assembly passed a resolution recognising access to clean water and sanitation as human rights. The resolution “urged states and international organisations to provide resources and to foster the transfer of technology to developing countries, with a view to providing access to water and sanitation” and declared “the right to safe and clean drinking water and sanitation as a human right that is essential for the full enjoyment of life”. The evidence over the years has shown that pricing and privatisation means that water as a human right suffers immensely.

Despite this, the IFC continues to promote the involvement of private players in the water sector in several countries in Asia and Africa. In India, the IFC has been involved directly in several private proposed or ongoing water projects in Bangalore, Kolhapur, Chennai and Tiruppur and has also been advising state governments in Maharashtra, Andhra Pradesh and Gujarat on water policy issues. In what critics say constitutes a conflict of interest, the IFC often provides technical advisory services to governments on water sector reforms, which recommend privatisation or PPPs, whilst acting as an equity investor in many private water companies.

The latest is Ghana, where the IFC is promoting private provision of water in villages through it’s “Safe water for Africa” partnership with Coca-Cola, Diageo and WaterHealth International (WHI, see Update 77). The IFC and its other corporate partners are now looking to substantially scale up private retail water delivery operations in Africa, announcing in September 2011 a target of installing up to 50 WaterHealth centers in Ghana. The partnership is also meant to collaborate with various partners to ‘address Africa’s water crisis’ with a reasonable price to ensure sustainable and equitable access. This approach directly benefits it’s corporate partners like Coca Cola.The IFC announced plans to invest $1 billion in the water sector and now seems to prefer to use the WHI model to push private water delivery.

A recent paper by US-based NGO Corporate Accountability International asks: “what is the ulterior motive, or at least the commonality of interests between these corporations in financing WHI’s expansion? At least three strategic outcomes can be observed: (1) self-dealing (profiteering), (2) political and cultural commodification of water, and (3) advancement of a self-proclaimed ‘new global architecture’ for corporate control of water.”

New venture with Nestlé, Coke, Veolia

Continuing this trend further, the World Bank Group, lead by the IFC, announced in October, a new venture with global corporations including Nestlé, Coca-Cola and Veolia called the 2030 Water Resources Group (WRG) Phase 2. This aspires to “transform the water sector” by bringing together multinational corporations with huge financial investment into the water business which has been predominantly a public service in most countries. This venture has already received $1.5 million in IFC funding.

The group’s strategy is to insert the private sector into water management one country at a time, through a combination of industry-funded research and direct partnerships with government agencies. Currently, WRG is formally working with the governments of Jordan, Mexico and the Indian state of Karnataka, with scaling up envisaged in South Africa and China.

A briefing from the group states: “The objective of WRG Phase 2 engagement in Karnataka is to help the government develop a water action plan for efficient and productive water usage … this water action plan needs to enhance water efficiency in irrigation, increase productivity of agriculture, as well as improve demand management and water use efficiency in the municipal and industrial sectors”.

The briefing further states that addressing the challenges to water provision in India “will require economic instruments (such as water pricing, usage caps and tradable water rights), regulatory instruments (such as clear ownership, mandatory usage and efficiency and reporting standards) and institutional reform (such as infrastructure investment, greater private sector participation in the water sector and capability building)”.

Vinay Baindur, an expert on water and urban issues working in Karnataka, notes that the World Bank, the government and the private sector are working in “a tripartite partnership to expand the stake for profits.” He calls the expected water supply privatisation in at least six more towns “a very well coordinated move on part of the water companies and the World Bank to keep expanding the market and not let the market shares of the big private players go down.”