World Bank assesses water strategy, faces barrage of criticism

30 September 2010

In September, the Bank released a progress report on the implementation of its 2003 water resources strategy, while criticism mounts over its hydropower lending, water resource management and support for private sector provision.

The Bank’s progress implementation report, Sustaining water for all in a changing climate, examines activities in the first six years of its strategy (see Update 29). It ignores the criticisms made by the Bank’s arms-length evaluation body, the Independent Evaluation Group (IEG) in a recent evaluation (see Update 70) preferring instead to focus only on achievements.

Hydro controversy

Plans to maintain water sector lending at around $6 billion annually from now until June 2013 are set out, with a focus on “continue[d] support for infrastructure” despite “high reputational risks”. This includes scaling up support for hydropower, “as the largest source of renewable and low carbon energy” (see Update 69, 66).

These plans are likely to enrage the 108 civil society organisations from around the world that wrote to the Bank in June to express their concern “that the Bank’s pledge to increase support for large hydropower projects will result in increased poverty and irreversible social and environmental damage.” They argued that large hydropower projects can increase greenhouse gas emissions, exacerbate conflict over water, and damage ecosystems, without necessarily increasing energy access for the poorest. They reiterated support for the recommendations of the World Commission on Dams (see Update 20) which the Bank “has done little to implement” since its report was released ten years ago.

The Bank’s progress report also promises to “increasingly” mainstream water into other sectors of Bank activity, and says that “efforts towards climate change mitigation will be paramount” in future investments. Timeyin Uwejamomere of international NGO WaterAid, noted that the Bank’s plans “are very unambitious in incentivising sanitation investments.”

IFC in hot water in Peru

The report highlights the Bank’s intention to “increase its assistance to agricultural water management” just as the International Finance Corporation (IFC), the Bank’s private sector arm, runs into trouble over this issue in Peru. In April, a Bank official was shot at, as tension mounted over the IFC’s support for one of Peru’s biggest asparagus producers, Agrokasa. The company is accused of contributing to the depletion of the aquifer on which farming in Huancavelica, the poorest region of Peru, depends. Since 1999, the IFC has lent $23 million to the company, though last year, after mounting criticism, Agrokasa withdrew an application for further funding from the IFC.

In June, the IFC’s internal watchdog, the Compliance Advisor Ombudsman (CAO) released an appraisal of complaints it had received from various groups, including local ground-water users’ associations, over alleged violations of IFC policies and performance standards. They decided to conduct an audit, saying it was “unclear whether IFC policy provisions have been applied properly and whether the IFC policy provisions provided an adequate level of protection” to local people. Drop by drop, a September report by NGOs Progressio, Centro Peruano de Estudios Sociales and Water Witness International said this “illustrates that the IFC’s safeguard measures have failed to assess or act on some of the risks attached to its lending” (see Update 72).

Wedded to the private sector

Longstanding criticisms of the Bank’s support for private sector provision of water (see Update 69, 62, 55) flared up again when the IFC made a €100 million equity investment in multinational Veolia Voda, for its activities in Eastern Europe. “A similar equity investment by the IFC in a Veolia competitor operating in the Philippines produced disastrous results for people living in and around Manila, who now face alarming water shortages,” said Joby Gelbspan of US-based NGO Corporate Accountability International.

Surprisingly, though the Bank’s progress report recognises that “it has been difficult to attract the private sector to water-related projects,” it also says that it still intends to “explore opportunities presented by private finance.”