IFC Finalizes EUR100 Million Deal to Push Water Privatization

The International Finance Corporation, the private investment arm of the World Bank, quietly finalized its EUR100 million investment in a corporation poised to expand water privatization across Eastern Europe at the exact moment when the same approach is exploding in failure in the Philippines and elsewhere.

"The IFC's attempt to simply let this deal sneak onto the books is telling, considering the size and profile of the investment," says Joby Gelbspan, senior Program coordinator for Corporate Accountability International, a 33-year-old corporate watchdog organization. "The IFC may be growing less proud of an investment in water privatization when, at this very moment, the same approach in the Philippines is resulting in protests, water shortages and a deepening political crisis there."

The IFC announced June 2 its intention to double its 2009 investment proposal and make a EUR100 million equity investment in Veolia Voda, the Eastern European subsidiary of the world's largest private water corporation. The investment was quietly transferred to Veolia Voda on June 24, the corporation confirmed to Gelbspan, though no news release was issued by either Veolia or the World Bank. Traditionally, months pass between announcement of the IFC's intention to make such an investment and the deal's execution.

The investment reflects a belief among World Bank institutions that creating access to safe drinking water in the developing world requires greater corporate control of water. By taking such a large ownership stake in Veolia Voda, however, critics charge that the IFC has created for itself a troubling financial incentive to ignore evidence that their belief is misplaced.

Despite repeated affirmations by the United Nations that access to safe water is a fundamental human right, indeed the "precursor to all other human rights," nearly a billion people still lack access to this essential resource.

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, Gelbspan says, who now face alarming water shortages. The seeds of this summer's crisis there were planted with the shift to water privatization, she says - a mistake the IFC is repeating with its investment in Veolia Voda. Numerous spokespeople in the Philippines, from water justice activists and economists to government and church officials, have spoken publicly this summer about the causal relationship between privatization and lack of sufficient water access.

"For these big water corporations, it's all profit and few pipes," Gelbspan says. "Veolia Voda has made clear it will not be investing in infrastructure to improve water access in Eastern Europe. Rather, it plans to squeeze out profits in the operation and maintenance of water systems by tightening up billing and downsizing staff. How this will bring clean drinking water reliably to more people is a mystery."