World Bank Supports Harmful Water Corporations, Report Finds

Water privatisation has been proven not to help the poor, yet a quarter of all World Bank funding goes directly to corporations and the private sector, bypassing both governments and its own standards and transparency requirements in order to do so, says a new report released Monday.

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 organisation 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 release of the report, entitled “Shutting the Spigot on Private Water: Case for the World Bank to Divest”, coincides with the start of the World Bank and International Monetary Fund’s 2012 Spring Meetings.

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 criticises 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 privatise 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 privatisation. 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 privatisation 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 privatisation 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.”

A World Bank spokesperson told IPS that the report misrepresented the World Bank’s role and did not elaborate. “IFC’s financing and advisory services have provided clean water and sanitation to over 20 million people as of 2011,” the spokesperson said.

World Bank reform?

Given that the bank is expected to vote on a new president this year – current president Robert Zoellick will step down in June – Louaillier suggested, “With a change at the top comes an opportunity for the bank to change course as it has before.”

One year ago, Zoellick declared that the world needs a “new geopolitics for a multi-polar economy, where all are fairly represented in associations for the many, not clubs for the few”.

In his view, the 2009 global financial crisis marked the definitive end of longstanding paradigms of the global economy and development. As a result, categorisations such as first or third world, donor or recipient, leader or led, “no longer fit”. Yet the reforms considered by the bank itself do not represent the same ideas.

Three candidates are on the list of Zoellick’s possible successors, with two of them non-U.S. candidates.

One is Nigerian finance minister Ngozi Okonjo-Iweala, the other former Colombian finance minister Jose Antonio Ocampo.

Whilst both have been raking in high-profile endorsements, the United States is claiming its right to nominate the new World Bank president, who has always been a U.S. citizen.

The candidate of the United States is the South Korean-born Jim Yong Kim, who is currently president of Dartmouth University and former head of the HIV/AIDS department at the World Health Organisation.