Global Policy Forum

By Russell Mokhiber and Robert Weissman *

Shown the folly of over-reliance on markets even in the world's richest country, the market fundamentalists at the World Bank are continuing their push for privatization of services -- with the provision of drinking water at the top of the list -- in the developing world.

Water works plagued by poor service and underinvestment can be rejuvenated by private water operators. That according to the World Bank, a compromised consulting industry and the private water industry -- dominated by the French firms Suez and Vivendi -- itself.

But citizen movements across the planet are rising to challenge the World Bank and corporate schemes to wrest control of now-public water systems. Perhaps the hottest flashpoint in the conflict between the people and the Water Barons is in Ghana. There, the National Coalition Against the Privatization of Water (NCAP of Water) is aggressively opposing a Bank-advocated privatization scheme that would lease out the country's urban water systems for a song. The scheme was hatched in 1995, and may be implemented next year, unless NCAP can thwart it.

To make the system generate enough revenue to pay the operator -- a handful of international operators, including Suez and Vivendi, are in the running to take over the system -- the privatization scheme would require persistent rate hikes. The goal is to achieve "cost recovery" -- tariff revenue sufficient to meet operations and maintenance costs, without any public subsidy to keep prices in check. This, even though systems in the United States, among other industrialized countries, routinely rely on support from general tax revenues.

Compounding the rate hikes, the privatization scheme calls for the inclusion of an "automatic tariff adjustment" -- with rates rising automatically to offset inflation and, most importantly, currency devaluations. That makes sense from the viewpoint of the foreign operator -- they will want to maintain constant profits in dollar-denominated terms, not in cedis, the local currency. But it is a disaster from the point of view of Ghanaian consumers -- their cedi income does not go up just because the value of the cedi declines. Assuming future devaluations, Ghanaian consumers will find themselves paying a higher and higher proportion of their income to the water company.

In exchange for certain, ongoing rate hikes into the indefinite future, Ghana is supposed to benefit from a more reliable and efficient system, and from expansion of the piped water system to reach the millions of urban consumers who are not connected to water pipes. But almost all of the evidence suggests these promises will turn out to be illusions or deceptions.

First, the record of private water company operation in developing countries is very poor. There is little to suggest that private companies deliver "efficiencies" in this area, though they are clearly skilled at extracting enormous profits.

The details of the Ghanaian privatization plans offer little comfort that things will be different in this case.

There are some incentives built in the proposal to increase the amount of water delivered -- many lower income Ghanaians may get water from pipes only once every two or four weeks -- but the proposed leasing terms would encourage the private operator to improve service for high-volume richer consumers, rather than low-volume poorer ones.

Achievement of water delivery and other performance standards would be self-monitored by the private water operator, overseen by a newly created regulatory agency with little experience and little chance of effectively controlling a giant multinational.

The proposed leasing arrangements impose only the most minimal investment requirements on the private operator (who would lease the system, rather than purchase it outright) -- and the operator is guaranteed a return even on that minimal investment, making it more of a loan than actual investment. So the operator will offer almost nothing in terms of new money for repairs or pipe expansion.

There is some new money promised in the deal for pipe expansion. But the money will all be in the form of new loans and some grants from the World Bank and donor countries. The private operator does nothing to obtain these loans, and has no pay-back obligations. This money -- desperately needed for system expansion -- could be made available right now (or could have been provided five years earlier), but the Bank and donors have made the loans and grants conditional on privatization.

Even this money is far less than needed to connect most urban Ghanaians to the piped water system. They will continue to rely on exploitative private water tanker operators, who buy water in bulk from the water utility, drive to areas without piped water service and sell to consumers at rates five or ten times that of price of piped water. The poorest people in cities have no choice but to rely on these water sources, and find themselves spending 10, 15 or even 20 percent of their income on drinking water.

The tanker prices could easily be controlled. The utility could operate tankers and sell tanker-provided water at the piped water rate. Or the private tankers could be tolerated, but required to sell water at a regulated price -- with the utility refusing to sell water to those tanker operators who fail to comply.

The World Bank has not considered these approaches, and at least one pro-privatization consultant's document suggests that such measures would interfere with the flourishing private market in water provision!

NCAP of Water, like colleagues around Africa and elsewhere in the developing world, rejects this market fundamentalist illogic. They insist that drinking water be treated as a right, not a commodity. Rather than inviting predatory multinationals in to drive up prices, suck up profits, serve the urban elite, and ignore the poor, they say, the public sector can and must be reinvigorated to ensure decent delivery of water, one of life's essentials.

* Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime Reporter. Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor, http://www.multinationalmonitor.org, and was a member of the International Fact-Finding Mission on Water Sector Reform in Ghana. They are co-authors of Corporate Predators: The Hunt for MegaProfits and the Attack on Democracy (Monroe, Maine: Common Courage Press, 1999; http://www.corporatepredators.org).

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