The World Bank's policy of funding the privatization of water is a financial and development failure, says a report released today by Corporate Accountability International.
The report, Shutting the Spigot on Private Water: The case for the World Bank to divest, documents the failures of water privatization efforts. It states that "thirty-four percent of all private water contracts marketwide entered between 2000 and 2010 have failed or are in distress – four times the failure rates of comparable infrastructure projects in the electric and transportation sectors."
Despite these failures, the World Banks is set to spend billions on privatization efforts. The "Bank’s private-sector arm is aiming to increase investments to $1 billion each year beginning in 2013," the group states.
The Bank's cozy relationship to private water corporations has led it to "consistently prioritize the profits of the water industry over meaningful interventions with the potential for lasting and broad impact. For more than two decades the Bank has promoted corporate control of water as the primary solution to the world’s water woes, without substantiation or accountability for the results."
“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 Corporate Accountability International. “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.”
The report concludes that "public investment in infrastructure has proven time and again to be the only viable means of delivering broad and equitable access to water," and says that the World Bank should move towards funding public and democratically accountable institutions.
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Privatization push ignores historical evidence
The World Bank and other private-water advocates now acknowledge that the initial rationale for privatization—that private investment in infrastructure would expand water access—was never a realistic expectation. Corporations are simply not inclined to make long-term infrastructure investments in developing countries. Indeed, historically, public investment has been the only successful model for developing and maintaining water delivery systems.
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“Crisis of faith” leads to new approach, similar problems
The track record of failure of private water projects, along with the new hesitancy on the part of water corporations to invest without substantial public support56 provoked the World Bank to reconsider the privatized model where corporations both own and operate utilities. It shifted its emphasis from investment in water infrastructure to outsourcing the operations of water distribution. Unfortunately, but not unexpectedly, the new path has led to similarly troubling results. Observers, including those within the World Bank, now acknowledge that the initial rationale for privatization— the private investment in infrastructure that would expand water access—was never a realistic expectation.
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A NEW COURSE NEEDED
The most recent statistics available indicate that bilateral and multilateral development institutions contribute over $8 billion annually in assistance for financing water and sanitation in developing countries.95 The world cannot afford to continue misdirecting these resources toward propping up a discredited model. The troubled history of private water, the increasingly dire human toll of inaction, and the clear theoretical consensus all demand a change in course.
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Based on the findings of this report, the World Bank should:
- Stop all support—financial and otherwise—for water privatization, beginning by divesting from all equity positions in water corporations.
- Revitalize World Bank funding for public water agencies to expand infrastructure and access.
- Stop promoting water privatization through research, public relations, advocacy and direct advisory services aimed at marketing privatization to borrower governments and populations.