How the World Bank’s Push for Private Water Harms the Poor...World Bank substantially cut its investment in the water sector, and these reductions were far greater than the actual

How the World Bank’s Push for Private Water Harms the Poor

Dried Up, Sold Out

About Food & Water WatchFood & Water Watch is a nonprofit consumer organization that works to ensure clean water and safe food. We challenge the corporate control and abuse of our food and water resources by empowering people to take action and by transforming the public consciousness about what we eat and drink. Food & Water Watch works with grassroots organizations around the world to create an economically and environmentally viable future. Through research, public and policymaker educa-tion, media and lobbying, we advocate policies that guarantee safe, wholesome food produced in a humane and sustain-able manner, and public, rather than private, control of water resources including oceans, rivers and groundwater.

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On the Cover

A Tanzanian woman gathers water for her family. Photo by Food & Water Watch.

A river in El Alto, Bolivia, is contaminated with blood from a slaughterhouse. Photo courtesy of Red VIDA.

A Bolivian citizen protests private control of city water. Photo courtesy of Red VIDA.

Dried Up, Sold OutHow the World Bank’s Push for Private Water Harms the Poor

Table of Contents iv Executive Summary

PART ONE: The World Bank and Water Privatization: A Failed Development Model

1 Introduction

2 Who Owns the World Bank?

2 World Bank Conditionality: With Strings Attached

2 Millenium Development Goals: A Lack of Political Will

3 Why Water Privatization Doesn’t Work

4 The Problem with World Bank Policies on Cost Recovery

5 The Many Forms of Water Privatization

5 Pricing Water: What Is Fair and Just?

6 Has the World Bank Admitted the Failure of Water Privatization Policies?

7 Water Privatization — The Real Cost of Failed Policies: Case Studies

7 La Paz & El Alto, Bolivia: No Water for the Poor

8 Guayaquil, Ecuador: Environmental and Public Health Catastrophes

9 Dar Es Salaam, Tanzania: Global Water Corporation Biwater Sues Heavily Indebted Country

10 Jakarta, Indonesia: Rising Consumer Water Rates and Corrupt Business Deals

PART TWO: Analysis of Current World Bank Loans and Policies

11 Section A: World Bank Finances Global Water Corporations

11 International Finance Corporation (IFC)

12 IFC Water and Sanitation Projects, 2000-2008

13 The Multilateral Investment Guarantee Agency (MIGA)

13 MIGA’s Water and Sanitation Projects

14 The Public Private Infrastructure Advisory Facility (PPIAF)

15 Manipulating Public Opinion: PPIAF Project in Malawi

15 Citizen Groups Ask Their Governments to Stop Funding PPIAF

15 The International Centre for the Settlement of Investment Disputes (ICSID)

16 Water Cases Filed with ICSID

16 Section B: World Bank Water & Sanitation Loans Still Push Privatization

17 Other Problematic Issues

17 Regional Summary of World Bank Water and Sanitation Portfolio, 2004-2008

18 Conclusion

19 Appendix: World Bank Water Supply & Sanitation Loans, 2004-2008

29 Endnotes

Executive Summary

Most people in the United States are accustomed to turning on the faucet and seeing safe and healthful water stream forth.

But take a trip into the developing world, and one often finds that the tap is dry. Indeed, literally billions of people in developing countries have no access to water and sewer services. And for those who do, the quality ranges from poor to downright dangerous.

Various international institutions and governments have long been laboring to right this injustice. Unfortunately, their approach has veered off track in the last few decades. Rather than sticking to the proven path of publicly funded water systems, the World Bank and other international financial institutions and governments have been promoting private control and ownership of water services. They claim this will lead to greater efficiency, improved management and more investment.

It hasn’t happened. This report, Dried Up, Sold Out: How the World Bank’s Push for Private Water Harms the Poor, shows that increased private sector participation has not made up for reduced public investment in water systems in developing nations. As a result, people there have had to make do with less or no water.

All that said, this trend can be reversed. The World Bank and other institutions can revert to their original course of promoting investment in public water and sewer systems that ensure the health and vitality of people all around the globe for generations to come.

Key Findings

Numerous international goals for getting water to poor countries have gone unmet.•

Because of dangerous water quality and lack of improved sanitation, gastrointestinal diseases such as diarrhea •and intestinal parasites are the leading cause of illness and death throughout the developing world.

Corporate pressure has caused international institutions and national governments to decrease public investments •in water provision, causing a simultaneous increase in private-sector profits.

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.

Although the messages are mixed, evidence suggests that some in the World Bank are gradually seeing the •problems with private control of water.

Case studies from Africa to Indonesia to Latin America illustrate the flawed logic of water privatization and why •now is the time to promote publicly owned and controlled water.

In sub-Saharan Africa, South Asia and East Asia (exclud-ing China) only 600,000 new water connections have been made as a result of private sector investment.2 In sub-Saharan Africa, 80 percent of the major water priva-tization contracts have been terminated or are the subject of disputes between the public authorities and the private operator over levels of investment.3 In Latin America, all of the high profile privatizations from those in Bolivia to Argentina have failed.

Because of the well-documented failure of privatization, many people are perplexed about why the World Bank and other international funding agencies are continuing to pur-sue this failed experiment. An investigation of the history of the policies demonstrates it is largely driven by political pressure from business interests in the developed coun-tries that fund and govern the bank. Creating an attractive

investment climate for politically powerful economic interests has, unfortunately, become as important a goal as providing water services.

The World Bank is using the enticement of new loans, new investment and modern technology to persuade developing country governments to privatize their water systems. It has even used the compelling moral imperative of meeting the Millennium Development Goals as a reason to privatize water systems.4 The private sector will provide the invest-ment, the World Bank says, to do what governments were unwilling or unable to do — connect more than a billion people to water and sanitation, thus helping to meet the development goals.

Unfortunately, the social cost of this strategy has been very high to those who continue to suffer without adequate

During the latter part of the 20th century the World Bank, other international finan-cial institutions and donor governments turned away from funding public water

systems and instead focused on promoting privatization of water services. They did this with the belief that private sector involvement would lead to greater efficiency, improved management and private investment in the expansion of infrastructure. The World Bank substantially cut its investment in the water sector, and these reductions were far greater than the actual investments made by the private sector.1 As a result, poor countries received billions of dollars less for investment in water.

Introduction

Part OneThe World Bank and Water Privatization:

A Failed Development Model

A public water tap in Tanzania. Photo by Food & Water Watch.

Dried Up, Sold Out: How the World Bank’s Push for Private Water Harms the Poor

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access to water and sanitation. Another lost decade in the struggle for decent water and sanitation services has meant that as many as 5 million people now die annually from preventable water-related diseases, mostly children.5,6 The cost of lack of access to decent water and sanitation services also includes women and children toiling long hours toting water to their homes. Children, especially girls, often are

kept out of school to perform these tasks. Families must pay a high percentage of their small incomes in order to buy water (in bottles or from tanker trucks) because they don’t have piped water in their homes.7 Each day, mothers are forced to make impossible decisions about whether to use the scarce family income for safe water, food, clothing, school fees or health care. These are the real costs of the World Bank’s water privatization policies.

The widespread practice of dumping human excrement and other toxic waste into waterways, often straight into the water that local populations rely upon, is having a devastat-ing effect on human health. Ninety percent of wastewater in developing countries is discharged untreated directly into rivers, streams and other local water bodies,8 which creates widespread environmental crises. The regulation of indus-trial waste is as important a goal in providing safe drinking water as the provision of water services.

While a large, well-organized water justice movement has emerged and is affecting the World Bank’s policies, it is time for the World Bank to admit its past mistakes and reverse its strategy. It is imperative that the World Bank, as a leader in the international development community, enable developing countries to create strong public utili-ties that provide drinking and sanitation systems. It also should promote a regulatory environment that prevents toxic pollution of waterways and encourages good resource management.

Millennium Development Goals: A Lack of Political Will United Nations agencies, with the participation and leader-ship of the most powerful countries of the world, have spent almost three decades setting goals for universal access to water and sanitation services.

But the goals have never been met. The UN declared 1981-1990 as the International Drinking Water Supply and Sanitation Decade, with the aim of providing safe drink-ing water and adequate sanitation systems for all people by 1991. This goal was not met. In 1990, the United Nations World Summit for Children called for universal access to water and sanitation services by 2000. This goal was not met either. In 2000, the Millennium Development Goals set the objective of reducing by one-half the number of people without access to safe drinking water and basic sanitation by 2015. These goals are much less lofty. They step back from the goal of universal access by seeking only to reduce the number of people without access by one-half. Nevertheless, the World Health Organization stated in

Who Owns the World Bank?The World Bank is a public international institution with 185 member governments. The governance structure of the World Bank allots the greatest percentage of voting power to the countries with the largest economic shares or capital subscriptions. The five largest shareholding countries appoint their executive directors to the World Bank Board. These countries are the United States, Japan, Germany, France and the U.K. Other countries are grouped together, usually in regional groupings, and elect one country to represent them on the Board. The five largest shareholding countries have the following percentage of the vote:

United States...............................................16.41%

Japan............................................................7.87%

Germany.......................................................4.49%

France...........................................................4.31%

United Kingdom.............................................4.31%

Source: World Bank website at www.worldbank.org. See sections on Board of Directors and Voting Power.

World Bank Conditionality: With Strings AttachedThe World Bank typically requires certain actions to be taken by country governments either before a loan is approved or in the course of the loan or project imple-mentation. This is commonly known as “conditionality.” Typical conditions can include requiring a government to privatize its state-owned companies, reducing trade barriers to foreign imports, cutting back state expen-ditures, or implementing new legislative or regulatory initiatives. The World Bank’s imposition of controversial conditions on borrowing governments, such as drasti-cally cutting public services or charging high user fees, has been heavily criticized over the years as a violation of national sovereignty and as an undemocratic way to push governments to impose policies that often have substantial consequences on people and the environ-ment. See sections on Board of Directors and Vot-ing Power.

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2005 that it is very unlikely that the development goal on basic sanitation will be met.9

It is already clear that sub-Saharan Africa will not be able to meet the goal of halving the population without access to safe drinking water.10 So it is highly unlikely, given the weak financial commitments and failed policies of national gov-ernments and international aid agencies such as the World Bank, that the Millennium Development Goals for water will be met. According to the Pacific Institute, even if the official goals for water are met and the population without access is reduced by one half, still as many as 32 million people will die by 2020 from preventable water-related diseases.11 This is an outrage. It should not be considered acceptable by the international community.

Worse yet, the development goals don’t take into account water pollution and its effects. According to Maude Barlow in her book, Blue Covenant: The Global Water Crisis and the Coming Battle for the Right to Water, the World Bank and United Nations seem to assume that “there is enough water for everyone without seriously addressing the mas-sive pollution of surface waters…”12

Barlow writes:

“In the last half-century, the human species has pollut-ed surface waters at an alarming and accelerating rate. The world may not exactly be running out of water, but it is running out of clean water. Ninety percent of wastewater produced in the Third World is discharged, untreated, into local rivers, streams and coastal waters. As well, humans are now using more than half of ac-cessible runoff water, leaving little for the ecosystem or other species.”13

With so much of the surface water polluted, people have turned to mining groundwater that most likely never will be recharged by the natural cycle of evaporation and precipitation.

“To deal with this vast pollution and the resulting ef-fect of reduced clean water supplies, farms, cities and industries all over the world are turning to ground-water sources, using sophisticated technology to drill deep into the Earth and pull up ancient aquifer water for daily use. This is a second piece of the ‘running out’ puzzle. We are taking water from where it is ac-cessible — in aquifers and other groundwater sources — and putting it where it gets used and lost, such as in mass irrigation of deserts, to make cars and comput-ers, or to produce oil from tar sands and coal methane beds where it becomes polluted or actually lost to the hydrologic cycle.”14

Why Water Privatization Doesn’t Work

It has been widely argued that water is part of the global commons. Water should be considered a public good or a public trust, with local management guided by the commu-nities within each watershed. This is a compelling argu-ment from an environmental and social justice perspective. However, regardless of the philosophical arguments about the water commons, the facts speak for themselves. Water privatization has been a commercial failure in most coun-tries across the world — even in developed countries like the United States and France.

Private water companies have been unable to meet obliga-tions to shareholders, to provide a market rate of return and also to meet their obligation to maintain and expand the water system and to provide acceptable quality water at affordable prices. Private sector companies are organized to make profits, not to fulfill socially responsible objectives such as achieving universal access to water and sanitation services. In most developing countries, the water and sani-tation system infrastructure desperately needs new invest-ment. Such investment has not kept pace with population growth, and large sectors of the low-income population

The atrium of the World Bank in Washington, D.C. Photo by Doug Clayton, Stock.xchng.


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remain unserved. However, private companies have little incentive to address the need to expand access to potable water when large sectors of the population are poor and unable to pay “market rates” for piped water. Private com-panies put shareholders first and low-income water users have suffered as a result. The World Bank’s water privatiza-tion experiment has revealed the commercial failure of the privatization model.

There have been two responses to the commercial failure of water privatization. First, many major corporate water con-glomerates, including Suez and Veolia, began to withdraw from these failed water privatization experiments during the last decade. In January 2003, Suez unveiled a new “ac-tion plan” designed to rescue the corporation from its debt problem and to chart the path back to profit. A key action item was the plan to reduce by one third the company’s exposure in “emerging countries.”15 Suez withdrew from water privatization concessions in Argentina, Bolivia, Brazil and the Philippines, among others.16 In Manila, Buenos Aires and other cities, the companies discovered there were limits on how far government regulatory structures would succumb to corporate demands.

Even weak regulatory bodies created to partner with corpo-rate interests had limits in their political ability to burden

consumers with continuous rate hikes in order to compen-sate for currency de-valuations or other corporate misfor-tunes.17 Several of the major water conglomerates decided to back away from the water privatization experiment and move more of their investments to telecommunications and energy ventures.

The second response to the commercial failure of water privatization was a concerted campaign on the part of international financial institutions such as the World Bank, as well as governments and corporations, to reduce the cor-porate risk involved in water privatization ventures. New forms of privatization contracts were developed, such as op-eration and management contracts where the private com-pany has no investment requirements and received a set fee for its services, regardless of revenue collection. The World Bank and other international financial institutions, guided by ex-International Monetary Fund Managing Director Michel Camdessus, proposed new credit, risk insurance and guarantee programs (subsidized with public tax dollars that fund the World Bank, IMF, export credit agencies and mul-tilateral banks) to protect the earnings of the global water companies in risky markets.18 These programs are designed to enable private companies to have a prominent role in the delivery of water and sanitation services.

The Problem with World Bank Policies on Cost RecoveryAccess to clean and affordable water and sanitation services are essential to public health. They should be a basic right for all. Providing water services usually requires pipes, treatment plants and chemicals and can be quite costly. But who should pay? What are fair and just policies for pric-ing water services? The World Bank focuses on increased cost recovery, which means charging consumers more for water. This tends to place a heavier burden on poor and low-income people. It is unfair and unrealistic to expect people who make a dollar or two a day to choose between clean water and other essential needs like food, health care or education. The alternative to increased cost recovery is to use the taxation system to provide financial resources for water services, either from within the country or through international agencies from donor governments.

The social contract — The “social contract” is an unwrit-ten agreement between citizens and democratic govern-ments that taxpayer dollars will be used to provide public funding for essential services such as education, health care, roads, and water and sanitation services. With a pro-gressive tax structure, expenditures for these basic services can ensure that income is redistributed for the benefit of all. When taxpayer money is used to provide essential

A broad coalition of non-profit organizations protest the World Bank at its annual meeting in Washington, D.C., in 2002 with a “Trojan horse.” Photo courtesy of Public Citizen.

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public services, the fees can be low or non-existent, and the services are available and affordable for all. Unfortunately, this social contract has eroded in many countries around the world. Nevertheless, the principle of prioritizing the use of taxpayer dollars or public money for basic services such as health care or water and sanitation should be asserted by citizens and upheld by governments.

World Bank policies have not upheld this principle. They have focused on increased cost recovery — increasing consumer water rates — as a principle mechanism to fund water utilities. Many World Bank loans have requirements that pressure governments to implement increased cost recovery and raise consumer water rates. (See the box “Pricing Water” at right for current figures.) The World Bank argues that developing countries are too poor to pro-vide public monies for water and sanitation services. They believe that consumer fees for services should cover the full cost of operating and maintaining the water utility.19 In some cases, the Bank has argued that consumer fees should also cover capital costs — the costs of building and expand-ing the water service infrastructure. The truth is that the majority of citizens in developing countries are too poor for the governments NOT to provide public funding for these essential services.

The World Bank’s policy of increased cost recovery has high social costs. When piped water becomes more expensive and therefore less accessible, women and children, who bear most of the burden for daily household chores, must travel farther and work harder to collect water. The higher cost of piped water often will drive people to resort to water from polluted streams, rivers or hand-dug wells. This in-creases the risk of water borne diseases, including diarrhea, cholera and parasites.

The Many Forms of Water PrivatizationThe World Bank has attempted to use a semantic maneuver to soften its promotion of water privatization. The Bank claims that the term privatization should only refer to a permanent full-asset sale of a water utility. There are many dif-ferent forms of water privatization that transfer some subset of the activities of the water utility to a private company for a stated period of time. The World Bank prefers to use the term Public Private Partnerships (PPPs) or Private Sector Participation (PSP). Below is a chart that shows some of the different forms of water privatization.

Source of company income

Control over tariff structure

Investment in infrastructure

Length of contract

Control over assets

Operation/Management contract

Fee for service Remains with state

Responsibility remains with state

Varies. Usually shorter than lease or concession

Remains with state

Lease/Concession Company derives revenue from user fees

Private company with state oversight

Private company takes partial responsibility

10-30 years Remains with state

Full asset sale Company derives revenue from user fees

Private company with state oversight

Private company takes full responsibility

Permanent Private company gains assets

Pricing Water: What Is Fair and Just?

Pricing water to reduce the burden on low-income people

Pricing water to increase the burden on low-income people

Taxpayer funding: the government uses taxpayer dollars to provide water and sanitation services

Full cost recovery: raises consumer water fees to cover the cost of operation and maintenance.

Water lifeline: a basic minimum amount of water is provided for free or at a very low cost.

Pre-paid meters: new technology that requires upfront payment. Cuts off household water when payment is due.

Cross-subsidies: wealthier water users subsidize low-income users, industry subsidizes residential users, or urban users subsidize rural users.

High connection fees: raises barriers to connecting to the piped network.

Free or affordable connection fees: this ensures that those outside the piped network will have access.

Special low-income programs: after water rates become unaffordable to the poor, low-income residents must wade through bureaucratic obstacles and stigma to become “eligible” for special programs.


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Has the World Bank Admitted the Failure of Water Privatization Policies?

Understanding the World Bank requires separating its pub-lic statements and research publications from actions — the loans, projects and policy prescriptions they promote. The World Bank is an enormous institution with many depart-ments and a large staff of people who want to do the best they can to alleviate poverty in an institution that is subject to the vagaries of the political process in the United States and other countries. As a result, the different arms of the World Bank often engage in rhetoric and actions that are contradictory to each other.

For example, during the World Bank’s annual Water Week in Washington, D.C. in May 2008, Bank vice president Kathy Sierra asserted that privatization was not “the only answer” — there needed to be a full spectrum mix of public-private investments. Only a few days earlier, senior World Bank official Shekhar Shah reported in New Delhi that the Bank had “learned the hard way” that it was not correct to leave water to the private sector.20

However, a statement by Lars Thunell, head of the Bank’s private-sector arm the International Finance Corporation, at World Water Week in Stockholm in August 2008 shows that the Bank is still committed to promoting private sector water provision: “We believe that providing clean water and sanitation services is a real business opportunity.”21

The IFC has just created a new $100 million fund, called IFC Infraventures, to provide risk capital for early stage development of infrastructure projects in developing coun-tries and also to encourage more public-private partner-ships.22 The Infraventures fund can be viewed as a renewed drive to promote private sector opportunities in infrastruc-ture — especially energy (oil, gas, electricity) and water-related projects. Rather than address the serious problems stemming from the failed water privatizations of the past, the IFC is moving forward with business as usual.

It is clear that the World Bank has not made a formal ad-mission of its failed water privatization policies, nor has the institution acknowledged the serious costs incurred by this hoax in the lives of billions of people who continue to lack access to water and sanitation. However, there has been an acknowledgment by the World Bank that privatization or public-private partnerships (the World Bank’s preferred euphemism) does not bring new private sector investment.

Many developing country governments were enticed by privatization due to the World Bank’s initial claims that pri-vate companies would actually invest in the rehabilitation

and expansion of much-needed water and sanitation infrastructure. But now the World Bank’s Public Private Infrastructure Advisory Fund (PPIAF) states there have been “no clear investment gains” from private sector par-ticipation in the water sector.23 The World Bank’s Water & Sanitation department concludes that:

Finding new sources of finance will be critical to expanding access to urban water supply and sanitation (WSS). Present investment towards the water Millennium Development Goals is only half what is needed. Public finance will con-tinue to be the main source of funding WSS investments. Private financing has accounted for less than 10 percent of investment in WSS over the last decade.24

It is important that the World Bank has admitted that the privatization model does not bring new private sector investment. However, the Bank has not begun to acknowl-edge the other aspects of the privatization failure. These include (1) the failure to expand services to the poor, (2) environmental and public health catastrophes, (3) legal quagmires and new debt burdens for governments, and (4) skyrocketing consumer water rates. Below are four short case histories of World Bank financed water privatizations that highlight these aspects of the failed privatization poli-cies and show the real costs — from the perspective of those without access to basic water and sanitation services.

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Water Privatization — The Real Cost of Failed Policies: Case Studies

1. La Paz & El Alto, Bolivia: No Water for the Poor

In the mid-1990s, the Bolivian government received a large loan from the World Bank to prepare the public water utilities in its three largest cities for sale to the private sec-tor. The loan also stipulated that the government should create a new institutional and regulatory framework that would protect the interests of consumers and create a free market economy.25 In 1997 the municipal water utility that serves the neighboring cities of La Paz and El Alto was auctioned off in a 30-year concession contract to the only bidder, Aguas del Illimani, a company involving Bolivian and Argentinean capital, with majority control held by the French multinational Suez.26

Most local residents in La Paz and El Alto were not very happy with the performance of the public provider, which offered sporadic service and never expanded to include the poorest neighborhoods. However, they were even less impressed with Aguas del Illimani. Over the seven years of the concession contract, there were scattered protests by residents over the inadequate water services. The poor and indigenous neighborhoods in the sprawling outskirts of El Alto were consistently excluded from water services. In January 2005, the simmering dissatisfaction culminated in protests, a general strike and road blockages that idled traf-fic between the two cities of La Paz and El Alto. A federa-tion of neighborhood and community councils, FEJUVE, raised the following grievances:

More than 200,000 residents were excluded from •the “served area” as defined in the concession con-tract. This left about one-fifth of the urban popula-tion without piped water. The excluded residents were forced to purchase more expensive water from vendors, drill their own wells or collect rainwater — solutions that contributed to a proliferation of water-borne diseases.27

Another 80,000 were excluded from service be-•cause they simply could not afford the cost of a new connection. To get water and sewerage connected to a home in La Paz or El Alto, it cost US$450, the equivalent of almost 9 monthly salaries working at minimum wage.28

FEJUVE called for an indefinite civil strike and demanded the cancellation of the water concession contract to Aguas del Illimani. Thousands of residents of El Alto responded to the call and took to the streets to demand access to decent water services. They were tired of being excluded from the

basic human right to clean and affordable water. Bolivian President Carlos Mesa feared that popular and indigenous protest would destabilize the country and bring down his government — a fate suffered by several predecessor gov-ernments. He agreed to cancel the privatization contract on January 12, 2005.

Since Mesa made this promise, the government dragged its heels looking for a way to cancel the contract without prompting an international lawsuit. Under the terms of the contract, Illimani has the right to sue for damages in international court should the contract be terminated in a “unilateral” manner.29 Facing pressure from FEJUVE, the government commissioned an independent audit of the company’s investment activities over its eight years of service (1997-2005).

The auditors found that Aguas del Illimani was paying at least US$1 million per year to Suez for management fees, money which could not count as its “investments.” The auditor also found that Illimani systematically failed to re-spect local environmental laws and had been dumping raw sewage into the Rio Seco river, the river that flows directly into Lake Titicaca. Suez falsely claimed that it had invested US$63 million to expand water and sanitation infrastruc-ture in La Paz-El Alto. However, an auditor determined that the entire net fixed assets of the company were only US$22 million.

Drinking water for a school in El Alto, Bolivia. Photo courtesy of Claudia Lopez.


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The auditor also discovered that the company should have been fined at least US$6 million by the government regu-lator for failing to meet the promised expansion targets for potable water in the cities of La Paz and El Alto.30 In November 2006, when Suez finally disbanded its opera-tions in La Paz and El Alto, Bolivian fiscal authorities calculated that the company left behind approximately $20 million in debt — a burden that will rest on the backs of Bolivian citizens — a country that already carries a heavy debt burden (46 percent of GDP) and where 40 percent of the population lives in extreme poverty. The privatization experiment in Bolivia left a bitter legacy.

2. Guayaquil, Ecuador: Environmental and Public Health Catastrophes

In October 2000, a Bechtel subsidiary, Interagua, signed a 30-year concession contract to run the water and sanitation services in Guayaquil, Ecuador. The U.S.-based company Bechtel had recently been thrown out of Bolivia due to a scandalous water privatization in the city of Cochabamba.31 To better protect its investments this time around, the com-pany requested a special package of political risk insurance from the World Bank. The World Bank’s specialized insur-ance arm, the Multilateral Investment Guarantee Agency (MIGA), provided Interagua with an $18 million invest-ment guarantee.32 The Ecuadoran government also received US$40 million from the Inter-American Development Bank to promote the privatization process.33

Problems surfaced shortly after the Bechtel subsidiary came to town. Lack of investment in storm drainage resulted in many residents suffering health effects and structural damage to their homes by the constant flooding. In 2002, the press reported that the company was only treating 5 percent of the sewage and dumping the rest, including fecal material and domestic and industrial waste, directly into the river.34 The health department began to issue reports in the press documenting health problems that children were experiencing in communities to the north of the city, such as Acuarelas del Río and Guayacanes, due to their proxim-ity to ongoing release of sewage into waterways. The health problems included skin, respiratory and gastric problems such as chronic rashes, asthma and diarrhea.35

Serious health problems resulted from the pollution of drinking water by flooding and dumping of sewage and other waste. The most serious health crisis ensued in 2005 when more than 150 children contracted hepatitis A from drinking dirty tap water. The outbreak was concentrated around the western suburbs of Guayaquil — a community where 76 percent of residents described their water as tur-bulent and foul-smelling and 74 percent compared its smell

to feces. Interagua denied responsibility for the outbreak, but subsequent studies confirmed that it was a combination of the disrepair of the school infrastructure, the inadequacy of the sewage system in the area, and the poor water quality that contributed ultimately to the outbreak of hepatitis A. Investigations by the Commission for Civic Control and the Public Defender’s office concluded that the poor service by Interagua had contributed to the hepatitis A outbreak and in October 2005 they declared the water “not fit for human consumption.”36

The public health was also compromised by repeated and ongoing residential water cutoffs for up to 36 hours at a time. Citizens groups organized to try to put an end to this practice, given that the concession contract required Interagua to provide an alternative source of water if a cut-off lasted longer than 24 hours.37 In addition to general water cutoffs, there has been an 180 percent increase in the price of water during the last six years, which has contrib-uted to an increased problem of residential water cutoffs due to inability to pay.38 Citizens groups are seeking reso-lution of these problems through a variety of legal means, including a case before the Inter-American Court of Human Rights.39

Open canals for wastewater in Guasmo, a neighborhood of Guayaquil, Ecuador. Photo courtesy of Observatorio Ciudadano de Servicios Públicos.

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The future of Interagua is uncertain. Bechtel recently sold 90 percent of its shares in Interagua to another private company. At the same time, a quiet democratic revolution is taking place in Ecuador, rooted in the activism of the indig-enous population. This citizens’ revolution is rewriting the country’s constitution and has included a clause, Article 318, that states that water must be a public good or a community holding — rather than a commodity that can be bought and sold by private companies. How this slowly brewing conflict will be resolved in Ecuador remains to be seen.

3. Dar Es Salaam, Tanzania: Global Water Corporation Biwater Sues Heavily Indebted Country

Tanzania, one of the poorest countries in the world and categorized by the World Bank as a “heavily indebted poor country,” was pressured by the World Bank and the International Monetary Fund to reduce its government expenditures and address its debt problem by privatiz-ing infrastructure and public services.40 In Tanzania less than 40 percent of the rural population and 70 percent of the urban population have access to piped water.41 The rest of the population must buy water at expensive rates from tanker trucks or private vendors or seek water from untreated sources. Women and children often walk up to 15 kilometers to fetch water of dubious quality. Cholera outbreaks are common.

Pressured by their desperate need for World Bank loans, in August 2003, the Tanzanian government contracted with City Water, a joint venture of Biwater Gauff Ltd. and a Tanzanian company, Superdoll Trailer Manufacturers Limited, to run the water and sanitation system in Dar es Salaam.42 The water privatization was part of a larger array of policies promoted by the World Bank as a requirement for access to new loans and debt relief. Tanzania received a World Bank loan of US$61.5 million in 2003, which required the country to pass enabling legislation, raise water rates through increased cost-recovery and prepare for privatization of water.43 Aid money from the British govern-ment also facilitated the water privatization project. The British Department for International Development paid Adam Smith International more than £500,000 to provide advice to the Tanzanian government on how to implement the water privatization and counteract resistance by citi-zens’ organizations.44

Less than two years later, City Water’s 10- year contract to run Dar’s water system was terminated by the government of Tanzania on the grounds that the company had made less than half the required investment and was not meeting the targets in the contract. The company’s behavior, which

also included raising water prices without substantial im-provement in services, so angered Tanzanian government officials that they decided to deport the top three Biwater executives in May 2005.45 Biwater retaliated by hitting Tanzania with lawsuits in both the British High Court and the World Bank-based International Centre for Settlement of Investment Disputes, claiming compensation for ‘future lost profits’ of $20-25 million.46

Nevertheless, the poorest areas in the outskirts of Dar es Salaam were not even included in the water privatization contract. Biwater constructed the water services contract to ensure maximum profitability and minimum invest-ment. This meant that large areas of the city, the poorest neighborhoods where new pipes needed to be laid to bring water to households, were exempted from the privatiza-tion contract. 47 The contracts to provide water services for these so-called “unprofitable areas” were given to charitable and non-profit organizations. More than £250,000 was spent by Adam Smith International on a communications and media strategy which included a video with a song in Swahili saying: “Our old industries are dry like crops and privatization brings the rain.”48

“Biwater never performed under the contract,” says Mussa Billegeya, staff for the Tanzania Association of NGOs. “They were supposed to increase revenue, but couldn’t collect the water fees. They didn’t even pay the lease fee to the

Informal water vendors pull small carts with jugs full of water through poor neighborhoods in Tanzania, where few residents are on a water pipeline. Photo by Food & Water Watch.


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government. They owed around $3.5 million to the gov-ernment in 2005. They did not contribute to a collection fund, which was meant to connect the poorest people. They were fulfilling almost none of the requirements in their contract.”49

The contract was clearly a failure from the start. However, when the Tanzanian government attempted to extricate itself from this policy failure by terminating the water privatization contract, it was unprepared for the legal backlash unleashed by City Water and its parent company, Biwater. Biwater sued the government of Tanzania twice — once in the British High Court under United Nations Commission on International Trade Law rules and once in the World Bank-based International Centre for Settlement of Investment Disputes.50 The government was left scram-bling to develop a legal strategy, pay hefty legal fees to international lawyers and take over the management of the city water services.

In January 2008, in a victory for the Tanzanian govern-ment, the tribunal decided that Biwater should pay $8 mil-lion in compensation to Tanzania. But it remains unclear if the government of Tanzania will be able to collect the millions in damages awarded to it as Biwater is seeking to use its corporate structure to avoid liability. In contrast to the first ruling, in July 2008 the World Bank’s ICSID panel ruled in favor of Biwater, but refused to grant the company any compensation for damages. Biwater continues to say it will not pay the $8 million awarded to Tanzania in the British High Court case — an amount sufficient to connect 50,000 people in Dar es Salaam to the water system.51

4. Jakarta, Indonesia: Rising Consumer Water Rates and Corrupt Business Deals

The leading roles in the water privatization drama in Jakarta are played by the global water companies Suez and Thames, officials and consultants from the World Bank and key business partners within the Suharto dictator-ship. In the early 1990s, the World Bank provided a $92 million loan for water infrastructure and began advising the Suharto government to privatize its water system.52 Under Suharto’s dictatorship, doing business in Indonesia meant partnering with a local firm. And the Suharto family controlled most local companies, so both Suez and Thames formed alliances with local Suharto-related businesses. In 1997, after protracted negotiations, the Suharto govern-ment awarded 25-year privatization contracts to a Thames partnership with Sigit Group (controlled by Suharto’s eldest son, Sugit Harjojudanto) and a Suez partnership with the Salim group.53

The following year, the entire political landscape shifted dramatically due to the downfall of Suharto and the Asian financial crisis. Fearful of protest in the streets, major company executives from Suez and Thames fled to the safety of Singapore. After intensive lobbying and interven-tion by British and French officials regarding the impor-tance of not “breaching the contract,” the companies were allowed to return. Since Suharto had fled the country and the former president’s family and business partners were targets of public anger, Thames and Suez agreed to buy out the local shares of their business operations in order to remove the tarnish of the Suharto family connections.54

New contract negotiations were finally concluded in 2001 and included an automatic tariff adjustment mechanism based on a complex formula and set to take effect in 2005. From 1998 to 2005 the consumer water tariff increase had already been approximately 227 percent.55 During this time the companies needed permission from the city council and governor to increase water tariffs. However, beginning in 2005 the new tariff adjustment was to take place automati-cally every 6 months. Today, the current average water tariff in Jakarta is approximately 7,000 Rupiah or about 75 U.S. cents per cubic meter, which is already the highest among similar cities in the Southeast Asia region.56 If priva-tization continues on schedule for the next 14 years, until 2022, there could be 28 more automatic tariff increases.

According to the People’s Coalition for the Rights to Water, even those lucky enough to have piped water in their homes cannot rely on the service because there is often no water flowing through the taps or the quality of the water is not suitable for human consumption. Ibu Ratih’s family, for example, pays a monthly water bill to the private company but often has to purchase bottled water from another small enterprise 2 kilometers away in order to have clean and safe water. They sometimes pay $US30 to $US50 every month to buy water even though they are paying for the piped wa-ter that they cannot use.57 Ibu Ratih is very angry about the water tariff increases. “How dare the government increase the water tariff! Every morning when all people need water, it does not come out,” she said.58

“How dare the government increase the water tariff! Every morning when all people need water, it does not come out.” – Ibu Ratih

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Section A: World Bank Finances Global Water Corporations

But Still No Water for the World’s Poor

There are four branches of the World Bank that have been especially important in providing money and support ser-vices for multinational corporations — including the largest global water companies. They are the International Finance Corporation, the Multilateral Investment Guarantee Agency, the Public Private Infrastructure Advisory Facility59 and the International Centre for the Settlement of Investment Disputes. Each of them has played an impor-tant role in promoting privatization.

The International Finance Corporation (IFC)

The International Finance Corporation (IFC) was cre-ated as a new branch of the World Bank in 1956. The IFC’s creation marked a significant turn in World Bank policies. The World Bank is an international organization owned and managed by governments. It was originally created to provide low-interest loans to its member governments. However, with the creation of the IFC, the World Bank expanded its mission to include providing loans to private corporations. The founding president of the IFC, Robert L. Garner (prior CEO of General Foods Corporation), opened his inaugural press conference on July 25, 1956, by saying that the IFC was the first inter-governmental organiza-tion to have as its main objective the promotion of private enterprise.60

Part TwoAnalysis of Current World Bank

Loans and Policies

Women wash clothes using discharge water from a water treatment plant in Bolivia. They live in the same neighborhood as the plant but did not have access to clean water until international activists helped the community lobby for one public faucet. Photo courtesy of Red VIDA.

Part II of this report reviews the current loans, projects and policies of the World Bank from 2004 to 2008. We have analyzed the extent to which the World Bank is

continuing to promote water privatization and cost recovery policies. The World Bank continues to grow in scope, with many arms tasked with mandates that are, at times, conflicting. Some arms of the World Bank are tasked with giving money to govern-ments. Other arms give money to private corporations. Section A of the report will ex-amine the loans, projects and policies of the institution that deal with private corpora-tions. Section B will analyze the departments of the World Bank that provide assistance to governments.


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Today, more than 50 years later, the IFC’s annual report states that they provided $16.2 billion of new private sec-tor investments in 2008.61 The report states that the IFC is “creating new opportunities for people to break free from poverty and improve their lives.” 62 But the pie graph illustrating the distribution of the IFC’s billions by sector shows that 40 percent of the investments were provided to “Global Financial Markets.”63 Unfortunately, as the current economy demonstrates, this is not the type of investment that helps people break free from poverty.

IFC investments in the water and sanitation sector show some similar problems. Between 2000 and 2008, the IFC proposed or approved US$528.9 million for water and sanitation projects. Approximately $257.4 million of this money, almost 50 percent, went directly to projects financ-ing the four largest European-based multinational water companies (Veolia, Suez, RWE and Biwater). World Bank officials will say that these multinational corporations were provided IFC financing because they were best able to do the job. However, it is important to note that these large water corporations do extensive lobbying with the most in-fluential governments at the World Bank. They have their own lobbying arm, the International Federation of Private Water Operators, with offices opposite the European Commission headquarters in Brussels.64

The IFC provides a variety of financial services to private corporations. These include basic loans, credit guarantees and equity investment (where the IFC buys shares in the in-vesting water company). Historically, the IFC has provided loans only to private sector companies. Recently it began to provide a few public sector loans, which made up about 15.6 percent of the IFC water portfolio from 2000-2008. However, as one might guess, the majority of IFC loans, about 80 percent, have gone to the four largest multina-tional water companies. A very large percentage of the credit guarantees also went to the four largest multinational water companies, about 45.9 percent. And about 42 percent of IFC equity investments were made in the four largest multinational water companies.

IFC equity investments have been highly controversial due to the potential conflict of interest they generate. It can be very problematic when a government is getting loans from one arm of the World Bank while it is the host country for a private company in which another arm of the World Bank owns shares. Then, to further complicate the matter, when a conflict between the government and the company develops, it is very common that the privatization contract

IFC Water and Sanitation Projects, 2000-2008Types of IFC Financing $ to the four largest water

multi-national corporations$ to other private corporations

$ to public sector TOTAL

IFC equity investments $36.8 million $50 million 0 $86.8 million% 42.4% 57.6% 0 100%IFC credit guarantees $44.6 million $30 million $22.5 million $97.1 million% 45.9% 31% 23.1% 100%IFC loans $176 million $115 million $54 million $345 million% 80% 33.4% 15.6%TOTAL IFC investments $257.4 million $195 million $76.5 million $528.9 million% 48.7% 36.8% 14.5% 100%

Source: IFC Projects Documents Search at: www.ifc.org/disclosure

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requires arbitration by a third arm of the World Bank (International Centre for the Settlement of Investment Disputes). This might sound like the plot of a cheap thriller novel, but it is a surprisingly common situation that has taken place in Argentina, Bolivia and Tanzania, to name a few. (See “Water Cases Filed with ICSID” on page 16 for details.)

The Multilateral Investment Guarantee Agency (MIGA)

In 1988, yet another arm of the World Bank, the Multilateral Investment Guarantee Agency (MIGA) was founded to provide exclusive services to the private sec-tor. The agency’s stated mission is to “promote foreign direct investment to help support economic growth, reduce poverty and improve people’s lives.”65 The central service provided by MIGA is political risk insurance for companies investing in developing countries. The political risk insur-ance provided by MIGA protects investors from losses that could be caused by expropriation, war and civil disturbance, breach of contract and currency transfer restrictions.66

Water privatization can be a very politically risky invest-ment. Citizens view water as a common good, a public trust — not as a commodity that can be bought and sold. For this reason there is often heated domestic opposition to water privatization projects and policies. In 2000, a mas-sive number of citizens rose up in Cochabamba, Bolivia against the water privatization policies of the U.S.-based company Bechtel. Following this incident, MIGA developed

a package of political risk insurance for another Bechtel wa-ter privatization in Guayaquil, Ecuador. Since then, MIGA has provided political risk insurance for eight other water privatization projects. Five of these projects, or about 56 percent of all MIGA’s water privatization projects, are based in China. MIGA has provided a total of US$257.23 million in political risk insurance for water privatization projects. US$126.98 million, about 50 percent, has gone to Chinese projects. In addition, more than half of MIGA’s political risk insurance for water privatization, US$132 million, has gone to just three multinational water companies; Suez, Compagnie Generale des Eaux (now Veolia) and Bechtel.

Historically, developing country governments have used certain tools such as nationalization (also known as ex-propriation) or currency controls (also known as currency transfer restrictions) to try to ensure that more of the benefits of foreign investment stay in the host country. However, these policies do not make for an “attractive in-vestment climate” for corporations and are heavily discour-aged by the World Bank. With help and support from the World Bank, corporate investors have developed a variety of mechanisms to protect their investments and ensure the flow of profits to shareholders. However, what is consid-ered an “attractive investment climate” for foreign inves-tors often includes a lack of sufficient environmental and social protections. For this reason, foreign investment can be very controversial and provoke political instability, civil disturbances and even war. In recognition of the conflict and social instability that foreign investment often causes, MIGA developed a package of political risk insurance to protect foreign investors.

MIGA’s Water & Sanitation ProjectsYear Country Company Amount Insurance Type Project2001 Ecuador International Water

Services (Bechtel)US$18 million Expropriation, war &

civil disturbanceWater supply services

2004 Russian Federation WTE Wassertechnik US$51.75 million Expropriation & breach of contract

Water supply & treatment

2004 China Darco Environment US$7.1 million Transfer restriction, expropriation, war and civil disturbance

Water supply & treatment

2004 China Compagnie General des Eaux

US$70 million Expropriation Water supply

2005 Russian Federation WTE Wassertechnik US$56.4 million Expropriation & breach of contract

Water treatment

2006 China Compagnie Generale des Eaux

US$40 million Expropriation Water & wastewater treat-ment

2006 Jordan Suez US$4.1 million Breach of contract Wastewater treatment2007 China Golden State Water

Group Corp.US$2.32 million Expropriation Water supply

2007 China Darco Environment US$7.56 million Expropriation Water treatment plant

Source: MIGA Projects Database at: http://www.miga.org/projects/index_sv.cfm


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The Public Private Infrastructure Advisory Facility (PPIAF)

In 1999 the World Bank created a special new office called the Public Private Infrastructure Advisory Facility (PPIAF). The mission of PPIAF is to convince governments that private sector involvement in water, energy, transporta-tion and telecommunications will improve performance and efficiency and bring new investment and technological improvements to their countries.67 PPIAF is managed by the World Bank, but most of its funding comes from the United Kingdom, with smaller amounts from Japan, the World Bank itself and 11 other countries, primarily from the European Union. The United States and the Asian Development Bank make small contributions as well.68 Much of the work of PPIAF is focused on funding consul-tants to provide technical advice to developing country governments on how to implement privatization projects. The “advice” provided includes pressuring governments to implement the regulatory and legal reforms that private corporations find most conducive to insuring adequate returns to their shareholders.69 PPIAF resources are used to promote “public private partnerships” as the solution to increasing efficiency and improving performance in what is usually underfunded and crumbling infrastructure in developing countries around the world.70 But PPIAF has not proven to be committed to expanding access to clean and affordable piped water for low-income people. Rather, its goal is to create new opportunities for private sector involvement (new profit streams for private corporations) in infrastructure development around the world.

However, given the track record of failure that has clouded water privatization projects, even the PPIAF literature has been forced to admit that there are serious problems with private sector participation in water infrastructure. The September 2006 PPIAF newsletter, Gridlines says: “Enthusiasm has been replaced by doubts.”71 The newsletter goes on to say, “the investment boom of the late 1990s has been followed by declining investment flows and the can-cellation or distress of several high-profile projects.”72 Latin America was the initial guinea pig for many of the high-profile water privatizations. To date, much of the impact of the failed water privatization projects has been suffered by people in the Latin America region and especially in the country of Argentina. The PPIAF newsletter explains the situation in Latin America like this:

“Indeed, its private water activity came largely to a standstill in 2005 with only four small projects award-ed. The drop in private activity appears to be a direct result of a backlash against utility concessions, which had been the favored scheme for introducing the pri-vate sector in the region.”73

Despite this “backlash,” it is clear that the advice and consultation services provided by PPIAF are designed to promote the interests of private sector companies. The consultation services do not provide developing country governments with an objective array of options for upgrad-ing, improving and expanding their water delivery and treatment services. Genuine, open-minded and indepen-dent consultation on all approaches to water utility reform would have to include options that do not merely promote new roles for private companies. Many other models exist that are based on partnerships with a wide range of public entities, community groups and non-profit organizations — local, national and international. Any serious discussion about how to expand and improve water and sanitation services for low-income people would need to include a full range of options.

Indebted developing country governments are usually des-perate for new sources of finance for infrastructure proj-ects. While PPIAF’s advice and consultation services may have previously taken advantage of this desperation when promoting private sector interests, the recent research pa-pers by PPIAF make it very clear that private companies do not bring increased investment to water sector projects.74 Other important research on the topic has reached similar conclusions.75 It is very significant that PPIAF itself is ad-mitting that the public-private partnership model does not bring new investment. In its recent report PPIAF notes that “…political leaders sometimes rashly promised that greater private investment in utility services would lead to vastly greater investment...”76 In the section of the report titled, “no clear investment gains,” the PPIAF report concludes:

“For lease and management contracts, particularly relevant for water and sanitation, there is generally no investment

Water rights activists protest at the 3rd World Water Forum held in 2003 in Kyoto, Japan. Photo by Food & Water Watch.

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obligation for the private party, and the results suggest that the public asset-holding company does not increase invest-ment even if PSP brings operational improvements. For concession contracts, there is no conclusive evidence that investment increases.”77

Perhaps the conclusion that private sector participation does not increase investment, as well as the track record of

failed water projects, has made it more difficult for PPIAF to convince governments to implement water privatiza-tion projects. This may explain why in at least 16 countries, PPIAF has funded projects to “build consensus” for water privatization.78 Building consensus refers to activities that promote the benefits of privatization or particular privatiza-tion options and attempt to persuade skeptical members of governments, legislatures, business, trade unions, civil soci-ety and citizens that privatization is in their interests. This is also referred to by PPIAF as “stakeholder engagement” and “strategic communication.”79 A typical example of this manipulation of public opinion is taking place in Malawi. (See “Manipulating Public Opinion” at left.) Other PPIAF projects focus on reforming laws, the regulatory environ-ment and institutions to make them friendlier to private sector investment. In total, PPIAF has funded 31 projects since its inception in 1999 in countries such as Afghanistan, the Congo, Colombia, Mozambique, Malawi and Mongolia.

Citizen Groups Ask Their Governments to Stop Funding PPIAF

In May 2007 more than 138 civil society groups and trade unions from 48 countries urged their governments to with-draw support for the World Bank’s PPIAF.85 The organiza-tions said that water, like air, is so essential to life that ac-cess to it is a human right, and water should not be treated as a commodity.

In an open letter, the organizations stated that the bias of the World Bank’s Public-Private Infrastructure Advisory Facility, PPIAF, towards private sector “solutions” to water access represents a poor use of aid money.86 In February 2007 the Norwegian government announced that it would not support PPIAF in the future because it no longer be-lieved the agency increased access to water for the poor.87 The Italian government followed with a similar announce-ment in May 2007.88 The European Commission said it would also review its contributions to PPIAF and the civil society groups vow to continue the pressure on their gov-ernments to cut PPIAF’s funding.

The International Centre for the Settlement of Investment Disputes (ICSID)

The International Centre for the Settlement of Investment Disputes (ICSID), a practically unknown part of the World Bank, was founded in 1966. ICSID is an international dispute mechanism used by foreign investors to take legal action against governments when privatizations or other projects fail and profits are lost.89 The more economi-cally powerful governments around the world have always sought new mechanisms to protect the economic interests

Manipulating Public Opinion: PPIAF Water Project in MalawiThe World Bank has been pushing water privatization in Malawi since 2000. A total of four World Bank water supply loans have been approved during this time, to-taling more than US$107 million.80 These loans financed technical studies, institutional and regulatory reform in the sector and a communications strategy all designed to push forward the water privatization project. Howev-er, the privatization process in water and other utilities has been delayed. The World Bank states that this is because:

“Over time, the levels of resistance to the program increased as people took the view that there was no consultation taking place between the [Privatiza-tion Commission] and its stakeholders.”81

Due to this resistance, the World Bank amended its original plans and funded a communications strategy and a public awareness campaign.” The World Bank loan attempted to manipulate public opinion by “funding media (television, radio and press) programs targeted at specific stakeholder groups, such as members of parliament, trade unions, employees and state-owned enterprises and civil society.”82

This was followed by a PPIAF project in 2007 that granted the government an additional US$149,550 for “in-depth public opinion research to design a communi-cations strategy to ensure two-way communication and participation of the urban water sector. The findings of this qualitative and quantitative research were used “to better understand the opinion and attitudes of consum-ers around water sector reform.”83

When this didn’t yield the desired result, PPIAF granted the Malawi government yet another loan in 2008 for “stakeholder consultation and public awareness building activities for the key policy makers,” as well as work-shops on private sector participation and advisory sup-port to Malawi’s urban water sector reform activities.84 Despite eight years of ongoing attempts to manipulate public opinion in Malawi, the citizenry is still extremely skeptical of the water privatization project and it is un-clear if the project will be able to move forward.


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of their major corporations abroad. Foreign investors argued that domestic court systems in the developing countries did not provide adequate protection for their in-vestments. The World Bank agreed to set up a new dispute mechanism, arguing that a new international arbitration system would help to promote increased flows of interna-tional investment.90 ICSID was structured by the World Bank in a manner that provided grandiose new powers to multinational corporations. This branch of the World Bank enables foreign corporations to sue sovereign states directly for monetary compensation.

Water privatization, as previously mentioned, has provoked social instability and generated conflict between govern-ments, their citizens, and the private company. Host gov-ernments can be easily intimidated when investors threaten lawsuits against them. Powerful corporations often enlist the support of their home country officials to resolve their investor disputes. For example, the Bush administration recently broke off free trade negotiations with Ecuador when the Ecuadoran government canceled a contract with Occidental Petroleum. Occidental Petroleum retaliated with an ICSID claim.91

To understand the imbalance of power, it is important to remember that it is not unusual for the revenues of a multi-national corporation to exceed the GDP of a small develop-ing country. Corporations that rank in the top 500 globally make up more than 20 percent of all ICSID claims.92 About 42 percent of ICSID cases involve the services sector (water, electricity, telecommunications and waste management).93 To date, there have been seven water privatization cases

filed with the World Bank’s ICSID. (See “Water Cases Filed with ICSID” below.) They have all been filed by large global water and energy companies including Suez, Biwater, Vivendi, Bechtel and Enron. The Bechtel case was settled out of court. Five of the seven cases were filed against the government of Argentina.

Section B: World Bank Water & Sanitation Loans Still Push Privatization

A grassroots water justice movement emerged in the late 1990s that linked activists fighting privatizations on the ground in developing countries with activists in the devel-oped world. This water movement has documented and publicized the abuses — forcing the World Bank and other international finance institutions to react. As a result, the good news is that World Bank water supply and sanitation (WSS) loans that push privatization and cost recovery are on the decrease.

In this section of the report we have analyzed the World Bank’s WSS loans to governments between 2004 and 2008. A similar study conducted by Public Citizen94 from 2000 to 2003 showed that about 94 percent of World Bank WSS loans promoted privatization and about 93 percent promot-ed increased cost recovery.95

In our research for this report we have found that between 2004 and 2008 approximately 52 percent of projects (78 projects totaling $5.9 billion) promoted some form of priva-tization. The private sector involvement in WSS projects included loans with the stated objective of obtaining private sector investment, increasing private sector participation in the water and sanitation sectors, or promoting outsourcing to the private sector.

Approximately 64 percent of WSS projects (93 projects totaling $7.2 billion) promoted some form of cost recovery, which results in impoverished people spending a large por-tion of their income on water services. Projects promoting cost recovery included recovery of operation and mainte-nance costs, tariff adjustment, subsidy reduction, increas-ing the commercialization of public water utilities and full cost recovery.

Between 2004 and 2008, the World Bank spent approxi-mately $9.5 billion in loans to fund 157 water supply and sanitation projects in more than 70 countries. (See box on opposite page for regional breakdown and Appendix I on page 19 for detailed loan information.) During this time, WSS projects funded by the World Bank shifted away from concession contracts and toward more operation and

Water Cases Filed with ICSIDClaimant Parent

CompanyDefending Country

Azurix Corporation Enron ArgentinaBechtel, Aguas del Tunari Bechtel BoliviaBiwater Gauff, Limited Biwater TanzaniaSuez, Sociedad General de Aguas de Barcelona, Interagua

Suez Argentina

Aguas Cordobesas, Suez, Sociedad General de Aguas de Barcelona

Suez Argentina

Suez, Sociedad General de Aguas de Barcelona, and Vivendi

Suez Argentina

Compania de Aguas de Aconquija and Vivendi

Vivendi Argentina

Source: ICSID cases listed on website at: http://icsid.world-bank.org/ICSID/FrontServlet?requestType=CasesRH&actionVal=ListCases

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management contracts and outsourcing. Public utilities were urged to become commercial operations with private sector management contracts. Many projects included provisions calling for the restructuring of public utilities, turning them into more autonomous bodies governed by a corporate board, with shareholders from both the public and private sectors.

While World Bank WSS projects still have about 52 percent promotion of privatization policies and 64 percent promo-tion of cost recovery policies, this is a vast improvement over the earlier part of the decade. We are pleased to see that the global water justice movement has had a major effect on World Bank policies. The World Bank is slowly inching away from privatization policies and returning to policies that emphasize greater support for public utilities.

It is important to note that the World Bank has not al-ways promoted privatization as the answer to problems in the water and sanitation sector. In fact, from the 1960s through the 1980s, World Bank loans to developing coun-tries focused on the creation and expansion of public water utilities. In the 1960s and 1970s, the prescription of World Bank economists and other development experts was that investment in public utilities and other large infrastructure projects would help trigger a development “take-off.” The thesis was that “public utilities, accompanied by financial stability and the encouragement of private investment, would do more than almost anything else to trigger devel-opment.”96 A return to these policies of supporting public water utilities should be applauded and encouraged.

Other Problematic Issues Our review of World Bank water supply and sanitation loans revealed a number of other problematic issues. For

example, about 35 percent of the projects included the in-troduction or expansion of water metering (55 projects to-taling $4.3 billion). Water conservation is often used as the reason for installing water meters in poor neighborhoods in the developing world. However, poor households in developing nations use a small amount of water compared to people in rich countries and to industrial agriculture. For example, one flush of a western toilet uses as much water as the average person in the developing world uses for a full day’s activities.97 The better route to solving water short-age problems would be to regulate industry and large-scale agriculture.

While there are certain situations where water meters can improve the social equity and fairness of water pricing, more often water meters tend to raise the price of water for low-income people and increase the barriers to access-ing clean and affordable water. Installing water meters is extremely expensive and has been used in some situations as a way to limit the number of people who are connected to water systems. For this reason we are very concerned to see such a large number of projects focusing on water meters.

In addition, a large number of the projects (62 projects to-taling $5.4 billion) include involuntary resettlement, which raises concerns regarding the potential loss of land and housing for low-income communities and small farmers.

There are also serious problems in all World Bank loans, water supply and sanitation loans included, with the high percentage of project monies going to consulting services located in the United States, the United Kingdom and other developed countries. Too often the consultants are high-paid technocrats associated with the World Bank and other regional development banks. The consultancy services do not provide a useful, independent or objective assessment

Regional Summary of World Bank Water and Sanitation Portfolio, 2004-2008Region Total No.

of ProjectsTotal Cost of Projects

Average Project Size

% Privatization Promotion

% Cost Recovery Promotion

Africa 47 $US2.1 billion $US45.6 million 50 percent 41 percent

East Asia & Pacific 29 $US2.9 billion $US86.3 million 68 percent 71 percent

Latin America & Caribbean 27 $US1.2 billion $US44.4 million 70 percent 78 percent

Europe & Central Asia 20 $US1.3 billion $US65.9 million 42 percent 79 percent

Middle East & North Africa 19 $US1.2 billion $US65.4 million 56 percent 56 percent

South Asia Region 15 $US790 million $US52.9 million 27 percent 60 percent

TOTAL 157 $US9.5 billion $US60 million 52 percent 64 percent

Source: Compiled from review of Project Information Documents (PIDs) and Project Appraisal Documents (PADs) available on the World Bank project database at: http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/


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of the proposed project. Approximately 43 percent of WSS projects included significant funds for consulting services. Overall, these consulting services do not add any substan-tial value to the project and they don’t make use of expertise local to the nation in which the project is being developed. Given the high cost of consultant services juxtaposed with the serious needs for basic water and sanitation services, we do not believe that consultant services are the best use of WSS project monies.

Conclusion

The World Bank’s promotion of water privatization and increased cost recovery has had very high costs for low-in-come people around the world. These privatization policies have failed to bring water services to those without, and the private sector has not invested in expanding access to clean and affordable water in the developing world. The World Bank’s cost recovery policies have made water more expensive and therefore less accessible—driving the world’s poorest people to drink from polluted streams, rivers, or hand-dug wells. The result has been an increase in eas-ily preventable water borne diseases, including diarrheal diseases, cholera and parasitic diseases.

The World Bank has not formally admitted the failure of its water privatization policies, nor has the institution acknowledged the serious costs incurred by this social experiment that has affected the lives of billions of people who continue to lack access to water and sanitation. But it is clear that the global citizens movement has affected this powerful institution’s policies.

From 2004 to 2008, the World Bank reduced the number of water supply and sanitation loans that promote privati-zation and increased cost recovery. This shows a slow but important shift in policy back toward support of public utilities. It is also very important that the World Bank has now acknowledged that the privatization model does not bring new private sector investment in water. Still, the World Bank has not begun to acknowledge many serious aspects of the water privatization failure, including the failure to expand services to the poor, the environmental and public health catastrophes, the legal quagmires and new debt burdens faced by governments, and the impact of rising consumer water rates.

In order to improve access to clean and affordable water, World Bank water supply and sanitation loans should im-mediately implement the following:

Remove all loan conditions, implicit and explicit, •that promote or require private sector participation

or public-private partnerships in World Bank water supply and sanitation loans;Remove all loan conditions, implicit and explicit, •that promote increased cost recovery by raising the price of water for low-income people or creating barriers to access to piped water services;Fully recognize the human right to water in •all World Bank policies related to water and sanitation;Encourage loans that strengthen public-public •partnerships (PuPs) and support the participation of citizens and community organizations in the management and oversight of water services; andPrioritize projects that improve the public health •by expanding access to affordable water services in low-income communities.

The World Bank should acknowledge that removing toxic pollution from waterways is an important goal for develop-ment. It should use its influence to:

Encourage countries to regulate industrial waste;•Take leadership at the international level to address •the problem of industrial and agricultural pollution.

Activists in the United States can hold our government accountable for its failure to adequately address the lack of access to clean and affordable water in the developing world by:

Educating yourself and others about the terrible •impacts of the lack of clean drinking water and sanitation in developing countries;Lobbying your legislators to continue funding •the Paul Simon Water for the Poor Act of 2005 and to pass the Paul Simon Water for the Poor Enhancement Act (to be introduced in 2009), which will create high-level posts at the State Department and USAID responsible for implement-ing the Act;Lobbying your legislators to advocate that the •World Bank stop pushing poor countries toward privatization of water and sanitation services.

Similarly, activists around the world can lobby their gov-ernments to advocate that the World Bank stop pushing poor countries toward privatization, and can demand that government foreign aid agencies give clean water and sani-tation the highest priority, protecting access to water as an affordable public good and part of the global commons.

Food & Water Watch

19

Appendix: World Bank Water Supply and Sanitation Loans, 2004-200898

AFRICA REGION

Project NameRecipient of Funds

Implementing Agency Country

Loan Amount (In $Millions)

Date Approved

Privatization Promotion

Cost Recovery Promotion

Water Sector Institutional Development Project

Republic of Angola

Ministry of Energy and Water Angola 57 7/31/2008 YES YES

Community Based Rural De-velopment Project Supple-mental

Government of Ghana

Ministry of Local Government, Rural Development and Environment Ghana 22 6/26/2008 NO NO

RCI – Emergency Urban Infrastructure (FY08)

Republic of Cote d’Ivoire

Ministry of Urban Development Cote d’Ivoire 90 6/12/2008 NO NO

Tana & Beles Integrated Water Resources Development

MOFED, Government of Ethiopia

Ministry of Water Resources Ethiopia 45 5/29/2008 YES NO

Multi-Sectoral Water and Electricity Infrastructure Project

Government of Burundi REGIDESO Burundi 50 5/13/2008 YES YES

Kampala OBA Water Connections for the Poor

Ministry of Water and Environment

National Water and Sewerage Corporation Uganda 3 5/1/2008 NO NO

Cameroon Water Affermage – OBA for Coverage Expansion

Government of Cameroon

Camwater (National Asset-Holding Public Company) Cameroon 5 5/1/2008

project document not available


Water and Sanitation Service Improvement Project

Republic of Kenya

Nairobi Water Services Board (WSB), Coast WSB, Lake Vic WSB Kenya 150 12/20/2007 YES YES

Blue Nile Start-Up Emergency Project

Government of the Blue-Nile State

Ministry of Finance, Government of the Blue-Nile State Sudan 7.32 12/3/2007



LR-Agriculture & Infrastructure Development Project

Government of Liberia

Ministry of Public Works Liberia 37 7/31/2007 NO NO

Senegal Sanitation – Sup-porting Access to on-site sanitation services through OBA scheme in Senegal

Government of Senegal

Office National De L’ Assainissement (ONAS) Senegal 7.7 7/6/2007 NO YES

Ghana Small Towns Water Supply & Sanitation Additional Financing

Government of Ghana

Community Water and Sanitation Agency Ghana 10 6/21/2007 YES NO

Mozambique Water Private Sector Contracts – OBA for coverage expansion FIPAG

Fundo de Investmento e Patrimonio de Ab-stencimento de Agua Mozambique 6 6/19/2007



CAR – Emergency Urban Infrastructure Rehabilitation & Maintenance

Central African Republic

Ministry of Public Works

Central African Republic 18 5/24/2007 YES NO

EPPR – Consolidation Phase – Maritime GA#090493 – LICUS Ref. No. 58

Republic of Togo AGAIB Maritime Togo 0.89 5/16/2007



Poverty Reduction Emer-gency Program – Savanes and BNL

Republic of Togo

AGAIB – SAVANES AND BNL Togo 0.42 5/16/2007




20




Date Approved



EPPR – Consolidation Phase – Savanes GA#090492

Republic of Togo AGAIB SAVANES Togo 0.89 5/16/2007



Urban Water Supply and Sanitation Project

Federal Democratic Republic of Ethiopia

Ministry of Water Resources Ethiopia 100 4/24/2007 YES YES

Emergency Urban and Social Rehabilitation Project

Government of the Democratic Republic of Congo TBD

Democratic Republic of Congo 180 3/29/2007 NO NO

Second Phase Community Based Rural Development Project

Government of Burkina Faso Ministry of Agriculture Burkina Faso 24 3/27/2007 NO NO

Urban Development ProjectGovernment of Chad

Ministry of Urban Development Chad 15 3/6/2007 YES NO

Water Sector Support Project

Government of United Tanzania Republic Ministry of Water Tanzania 200 2/13/2007 YES YES

Freetown Water Supply Rehabilitation

Republic of Sierra Leone

Guma Valley Water Company Sierra Leone 8.23 1/30/2007 YES YES

Additional Financing for the Services Support Credit

Government of the Union of Comoros

Fonds D’Appui au Developpement Communautaire Comoros 5 12/21/2006 NO NO

Kenya Microfinance for Water Services Project

Community Water Projects K-Rep Bank Ltd Kenya 1.15 12/6/2006



Rural Water Supply and Sanitation

Government of Sudan

Ministry of Cooperative and Rural Development Sudan 15 10/27/2006 NO YES

Licus grant in support of CDD activities

Government of Central African Republic COOPI

Central African Republic 2.7 10/10/2006



Water Sector Performance Improvement Project

Government of the Republic of Zambia

MLGH/Ministry of Energy and Water Development/Utilities Zambia 23 10/5/2006 YES YES

Water Sector Project – Additional Financing

Government of Niger Ministry of Water Niger 10 7/18/2006 YES NO

AGAIB Maritime – LICUS Ref. No. 18 C, TF056809 AGAIB Maritime AGAIB Maritime Togo 0.43 6/22/2006



Emergency Infrastructure Project

Government of Liberia

Ministry of Public Works Liberia 30 6/20/2006 NO NO

Multi-sector Infrastructure Rehabilitation Project

Government of Guinea-Bisseau

Ministry Of Energy / EAGB / Ministry Of Public Works

Guinea-Bisseau 15 6/15/2006 YES YES

Urban Infrastructure and City Management Project

Government of Rwanda

Ministry of Infrastructure Rwanda 20 11/10/2005 YES NO

Second National Urban Water Sector Reform Project

Government of Nigeria

Lagos State Government Nigeria 200 7/1/2005 YES YES

Food & Water Watch

21




Date Approved



AO-Emerg MS Recovery ERL (FY05)

Government of Angola Ministry of Planning Angola 50.7 2/17/2005

Insufficient information in project docu-ment

Insufficient information in project docu-ment

Lesotho Water Sector Im-provement Project

Government of the Kingdom of Lesotho

Ministry of Natural Resources Lesotho 14.1 10/26/2004 YES YES

Local Development Program Support Project

Government of Chad

Ministry of Land, Ur-banism and Habitat Chad 23 9/16/2004 NO NO

Community-Based Rural Development

Government of Ghana

Ministry of Local Government and Rural Development Ghana 60 7/29/2004 NO NO

Small Towns Water Supply and Sanitation Project

Government of Ghana

Water and Sanitation Department of GWCL Ghana 26 7/27/2004 YES YES

Urban Water ProjectGovernment of Ghana

Ghana Water Corpora-tion Limited (GWCL) Ghana 103 7/27/2004 YES YES

Power and Water ProjectRepublic of Sierra Leone

Ministry of Energy and Power Sierra Leone 35 7/1/2004 YES YES

National Urban Water Sector Reform Project 1

Federal Ministry of Finance

Federal Ministry of Water Resources Nigeria 120 6/15/2004 YES YES

Ethiopia Water Supply and Sanitation Project

Government of Ethiopia

Ministry of Water Resources Ethiopia 100 5/11/2004 YES YES

Community-Based Rural Development

Government of Islamic Republic of Mauritania

Ministry of Rural Development and Environment Mauritania 45 4/20/2004 NO NO

Service Support CreditGovernment of Comoros

Fonds D’appui Au Developpement Communautaire Comoros 13.3 3/13/2004 YES YES

Second National Water Development Project – Supplemental Credit

Government of Mozambique

Ministry Of Public Works And Housing Mozambique 15 2/26/2004 YES YES

Total percentages

50% of projects promote privatization

41% of projects promote cost recovery

MIDDLE EAST AND NORTH AFRICA REGION




Date Approved



Additional Financing for Third Social Fund for Development Project

Government of Yemen

Social Fund for Development Yemen 10 6/26/2008 NO NO

GZ-North Gaza Sewerage Treatment Plant Additional Financing

PLO for the benefit of PA

Palestine Water Authority (PWA)

The West Bank and Gaza 12 4/22/2008 YES YES


22




Date Approved



GZ-Gaza II Emerg Water Add. Financing


Coastal Municipalities Water Utility

The West Bank and Gaza 5 4/22/2008 YES YES

IQ-Emergency Community Infrastructure Rehab Additional Financing

Government of Iraq

Ministry of Water Resources Iraq 26 4/10/2008 YES NO

Integrated Sanitation & Sewerage Infrastructure Project

Government of Egypt

National Organization of Potable Water and Sanitary Drainage Egypt 120 3/20/2008 YES YES

Rural Water Supply – Additional Financing

Government of Yemen

Ministry Of Water & Environment And Governorate Level Yemen 20 1/15/2008 NO NO

Bekaa Emergency Water Supply Project

Government of Lebanon

CDR/Regional Water Authority/Ministry of Energy and Water Lebanon 15 3/20/2007 NO YES

Morocco Urban WS&S Access Pilots

Government of Morocco

Lydec, Amendis, Radem Morocco 7 1/29/2007 YES YES

Emergency Services Support Program Multi-Donor Trust Fund

Office of the President, Palestinian Authority

Office of the President, Palestinian Authority

West Bank and Gaza 62 9/18/2006



Rural Water Supply and Sanitation Project ONEP ONEP Morocco 60 12/15/2005 YES YES

Urban Water Supply Project

SONEDE with Government guarantee

SONEDE (Societe National d’Exploit & Distrib. des Eaux) Tunisia 38.03 11/17/2005 YES YES

Gaza Water and Sanitation Project 02


Coastal Municipalities Water Utilities Gaza 20 6/7/2005 YES YES

IR-Northern Cities Water Supply & Sanitation Project

Government of Iran

Guilan Water And Sewerage Comp. (WWC) and the Mazandaran WWC

Islamic Republic of Iran 224 5/26/2005 YES YES

Emergency Community Infrastructure Rehabilitation Project

Government of Iraq

Ministry of Water Resources Iraq 20 12/10/2004



IQ-TF Emerg. Baghdad Water Supply Republic of Iraq

Municipality of Baghdad Iraq 65 12/3/2004



IQ-TF Emerg. Water, Sanitation & Urban Republic of Iraq

Municipality of Baghdad Iraq 90 12/3/2004

Insufficient information in project document

Insufficient information in project document

IR-Ahwaz & Shiraz Water Supply and Sanitation Project

Islamic Repub-lic of Iran

NWWEC and Ahwaz and Shiraz

Islamic Republic of Iran 279 5/25/2004 YES YES

RY-Social Fund For Development III

Republic of Yemen

Social Fund For Development Yemen 60 2/26/2004 NO NO

Total percentages



Food & Water Watch

23

EUROPE AND CENTRAL ASIA REGION




Date Approved



Additional Financing for the Municipal Water and Waste Project

The Republic of Armenia

Armenia Water and Wastewater Corpora-tion (AWSC) Armenia 20 10/30/2008 NO YES

Regional and Municipal Infrastructure Development Project Georgia

Georgia Municipal Development Fund Georgia 40 10/2/2008 NO YES

Belarus Water Supply and Sanitation Project

Republic of Belarus

Ministry of Housing and Utilities Belarus 60 11/4/2008 YES YES

Second National Water Supply and Sanitation Project

Government of Republic of Azerbaijan AzerSu Azerbaijan 260 5/27/2008 NO YES

National Water Supply and Sanitation Program

Government of Moldova

Agency for Construc-tion and Territorial Development Moldova 14 5/13/2008 NO YES

Rural Investment (AZRIP) Project Additional Financing Azerbaijan ASDAPS Azerbaijan 15 3/27/2008 NO NO

Urban Infrastructure Project Ukraine

Min. of Construction, Architecture & Housing & Communal Svcs Ukraine 140 8/23/2007 YES YES

Urban Infrastructure Additional Financing

Bosnia-Herzegovina

Ministry of Foreign Trade Bosnia 5 6/19/2007 YES NO

Water Supply Project

Government of the Republic of Azerbaijan AzerSu Azerbaijan 230 6/14/2007 YES YES

Sustainable Tourism Development Project (Montenegro)

Serbia and Montenegro

Program Coordination Unit (PCU) Montenegro 10 6/12/2007 NO NO

Additional Financing for the Dushanbe Water Supply Project

Government of Tajikistan

The Dushanbe Vodokanal Tajikistan 5 12/19/2006 YES YES

Second Village Investment Project Kyrgyz Republic

Community Development and Investment Agency

Kyrgyz Republic 15 8/3/2006 NO NO

Municipal Services ProjectMinistry of Public Finance

Ministry of Public Finance Romania 131.7 7/13/2006 YES YES

Municipal Infrastructure Development Project

Government of Tajikistan

Municipality of Dushanbe and Other Towns, Oblasts Tajikistan 15 1/19/2006 NO YES

Municipal Services Project Iller Bank Iller Bank Turkey 275 6/23/2005 NO YES

Quality Protect GEF N/A

Ministry of Agriculture, Water Management and Forestry

Bosnia and Herzegovina 8.9 6/7/2005 NO YES

Yerevan Water and Waste-water Project

Ministry of Finance and Economy

Yerevan Water and Sanitation Company Armenia 20 2/24/2005 YES YES


24




Date Approved



Urban Infrastructure & Service Delivery Project

Government of Bosnia and Herzegovina

Ministry of Foreign Trade and Economic Relations

Bosnia and Herzegovina 20 7/8/2004 NO YES

Municipal Water and Wastewater Project

Ministry of Finance and Economy

Armenica Water and Sewerage Company Armenia 23 5/2/2004 YES YES

Total Percentages



SOUTH ASIA REGION




Date Approved



ARTF-Kabul Urban Recon-struction Project

Governmentof Afghanistan

Ministry of Urban Development Afghanistan 5.6 6/13/2008



Second Rural Water Supply and Sanitation Project – Ad-ditional Financing

Government of Nepal

Rural Wate Supply and Sanitation Fund Development Board Nepal 27 5/6/2008 NO YES

Poverty Alleviation Fund IIGovernment of Nepal

Poverty Alleviation Fund Board Nepal 100 12/6/2007 NO NO

Naandi – India FoundationNaandi Foundation Naandi Foundation India 0.85 5/16/2007



Sri Lanka: Puttalam Housing Project

Government of Sri Lanka

Ministry of Resettlement Sri Lanka 32 2/20/2007 NO YES

Punjab Rural Water Supply and Sanitation

Government of India Government of Punjab India 154 12/14/2006 YES YES

Uttaranchal Rural Water Supply and Sanitation Project

Government of India

Government of Ut-taranchal India 120 9/5/2006 NO YES

Punjab Municipal Services Improvement Project (PMSIP)

Government of Pakistan Government of Punjab Pakistan 50 6/1/2006 NO YES

Afghanistan Urban Water Sector Project

Islamic Transi-tional State of Afghanistan

Central Authority for Water Supply & Sewerage Afghanistan 40 5/25/2006 YES NO

ARTF – Rural Water Supply and Sanitation Project

Islamic Transi-tional State of Afghanistan

Ministry of Rural Rehabilitation and Development Afghanistan 5 12/15/2005



Hydrology Project Phase II

Department of Economic Affairs

Ministry of Water Resources India 104.98 8/24/2004 NO YES

Bangladesh Water Supply Program Project Bangladesh

Ministry of Local Government Bangladesh 40 6/17/2004 YES YES

Food & Water Watch

25




Date Approved



Second Rural Water Supply & Sanitation Project

The Kingdom of Nepal

Rural Water Supply & Sanitation Fund Development Board Nepal 23.5 6/1/2004 NO YES

Karnataka Urban Water Sector Improvement Project

Government of India

Karnataka Urban In-frastructure Develop-ment Finance Corp. India 39.5 4/8/2004 YES YES

Community Development and Livelihood Improvement “Gemi Diriya” Project

Government of Sri Lanka

GEMI DIRIYA FOUN-DATION Sri Lanka 51 3/30/2004 NO NO

Total percentages

27% of loans promote privatization

60% of loans promote cost recovery

EAST ASIA AND PACIFIC REGION




Date Approved



LA-Poverty Reduction Fund Project Lao PDR

Lao Poverty Reduction Fund Laos 15 7/8/2008 NO NO

LA-Khammouane Develop-ment Project

Government of Lao, PDR

Office of the Governor, Khammouane Province Laos 9 (grant) 6/17/2008 YES NO

National Program for Com-munity Empowerment in Rural Areas

Republic of Indonesia

Ministry of Home Affairs Indonesia 231.19 5/20/2008 NO NO

Vietnam Rural Water (East Meets West)

East Meets West Founda-tion

East Meets West Foundation Vietnam 3 11/30/2007 NO YES

Jakarta Water

Thames Pam Jaya; Pam Ly-onnaise Jakarta

Thames Pam Jaya; Pam Lyonnaise Jakarta Indonesia 5 11/1/2007 YES YES

Manila Water Supply Manila Water Manila Water Philippines 1 10/19/2007 YES YES

China-Second Liaoning Medium Cities Infrastructure Project

People’s Republic of China

Liaoning Provincial Government China 173 6/26/2007 YES YES

Western Provinces Rural Water Supply, Sanitation and Hygiene Promotion Project


Sichuan and Shaanxi Provinces China 25 6/26/2007 NO YES

Mindanao Rural Develop-ment Project – Phase 2

Government of Philippines

Department of Agriculture Philippines 83.75 3/22/2007 YES NO

CN-Second Guangdong Pearl River Delta Urban Environment Project

People’s Republic of China N/A China 96 3/21/2007 YES YES

Second Shandong Environment Project


Shandong Provincial Government China 147 2/27/2007 YES YES


26




Date Approved



CN-GEF-Second Shandong Environment Project


Shandong Provincial Government China 5 2/27/2007



Coastal Cities Environmental Sanitation Project Vietnam

Socialist Republic of Vietnam

CITIES OF NHA TRANG, QUY NHON, DONG HOI Vietnam 124.7 12/19/2006 YES YES

VANUATU - Utility Regula-tory Authority

Ministry of Finance Ministry of Finance Vanuatu 0.9 11/28/2006



ID-Aceh-Infra. Reconstr Enabling Program (IREP)

BRR – Republic Of Indonesia BRR Indonesia 42 6/30/2006 NO YES

Third Water Supply and Sanitation for Low Income Communities Project

Republic of Indonesia Ministry of Health Indonesia 137.5 6/27/2006 YES YES

Liaoning Medium Cities Infrastructure Project


Liaoning Provincial Government China 218 6/27/2006 NO NO

Henan Towns Water Supply and Sanitation

People’s Republic of China Province of Henan China 150 6/27/2006 YES YES

VN-Red River Delta Rural Water Supply and Sanitation Project


Ministry of Agriculture and Rural Develop-ment Vietnam 45.87 9/15/2005 YES YES

Shanghai Urban Environ-ment APL Phase 2


Shanghai Municipal Government China 180 7/5/2005 YES YES

Manila Third Sewerage Project

Land Bank of the Philippines

Manila Water Company, Inc Philippines 64 6/21/2005 YES YES

Chongqing Small Cities Infrastructure Improvement Project


Chongqing Municipal-ity China 180 6/21/2005 YES YES

Initiatives for Local Gover-nance Reform Project

Government of Indonesia

MINISTRY OF HOME AFFAIRS, DIR.GEN-ERAL OF REGIONAL Indonesia 29.5 6/9/2005 YES NO

Dutch TF Grant – ID Water and Sanitation Program

Government of Indonesia

Bank and Government of Indonesia Indonesia 6 2/10/2005



Vietnam Water Supply Development Project


Municipal and Provincial Water Supply Companies Vietnam 112.64 12/21/2004 YES YES

Second Ulaanbaatar Ser-vices Improvement Project Mongolia

Municipality of Ulaanbaatar Mongolia 18 4/29/2004 YES YES

Water Resources Assistance Project

Government of Vietnam

Ministry Of Agriculture And Rural Development Vietnam 157.8 3/30/2004 NO YES

Zhejiang Urban Environment Project


Zhejiang Provincial Government China 113 1/29/2004 YES YES

Total Percentages



Food & Water Watch

27

LATIN AMERICA AND CARIBBEAN REGION




Date Approved



Sergipe State Integrated Project: Rural Poverty State of Sergipe

Secretariat of Planning – Pronese Brazil 20.8 11/23/2008 NO YES

Bage – RS Integrated Municipal Development Program

Municipality of Bage Municipality of Bage Brazil 60 7/23/2008 NO YES

Nicaragua Rural Water and Sanitation Project

Government of Nicaragua

Nicaraguenese de Acueducto y Alcantarillado Sanita Enacal EMP Nicaragua 20 6/12/2008 YES YES

Recife Urban Develop-ment and Social Inclusion (CAPIBARIBE MELHOR)

Municipality of Recife Municipality of Recife Brazil 32.76 12/20/2007 NO YES

Lake Titicaca Local Sustainable Development

Government of Bolivia

Vice Ministry of Tourism Bolivia 20 12/20/2007 YES YES

Water Supply and Sanitation in Low-Income Communities

Government of Panama Ministry of Health Panama 32 7/17/2007 YES YES

AR Infrastructure Project for the Province of Buenos Aires (APL2)

Government of the Province of BS AS

Ministry of Economy of the Province of Buenos Aires Argentina 270 6/28/2007 YES YES

OSE Modernization & Systems Rehabilitation Project APL-2

Obras Sanitarias del Estado (OSE)

Obras Sanitarias del Estado (OSE) Uruguay 50 6/28/2007 YES YES

Honduras Water and Sanitation Sector Modernization Project

Government of Honduras

Fondo Hondureno De Inversion Social (FHIS) Honduras 30 6/21/2007 YES YES

GPOBA W3 – Honduras OBA Fund

Government of Honduras

Fondo Hondureno De Inversion Social (FHIS) Honduras 4.44 6/19/2007



Water Supply Infrastructure Improvement Additional Financing

Government of St. Lucia Ministry of Finance St. Lucia 1.84 4/10/2007 YES NO

BR Municipal APL1: UberabaMinistry of Uberaba

Ministry of Uberaba and Codau Brazil 13.27 3/21/2007 YES YES

La Guajira Water and Sani-tation Infrastructure and Service Management Project

Department of La Guajira

Gobernacion of Department of La Guajira Columbia 90 3/15/2007 YES YES

Haiti Rural Water and Sani-tation Project

Republic of Haiti

Service National d’Eau Potable Haiti 5 1/30/2007 YES YES

Additional Financing for the Federal Water Resources Management Project

Government of Brazil

ANA (National Water Agency) / Ministry National Integration Brazil 50 12/19/2006 NO YES

BR APL 1 Para Integrated Rural Dev

Para State Government n/a Brazil 60 12/12/2006 YES NO

Additional Financing for the Rural Poverty Reduction Project – Pernambuco

State of Pernambuco

Secretariat for Social Development and Citizenship Brazil 30 10/19/2006 NO NO


28




Date Approved



Rural and Small Towns Water Supply and Sanitation Project II (PRAGUAS)

Republic of Ecuador

Ministry of Urban Development, Housing and Basic Sanitation Ecuador 48 7/25/2006 YES YES

Additional Financing for the Rural Poverty Reduction Project – Piau State of Piau

State Secretariat of Planning Brazil 22.5 7/18/2006



Basic Municipal Services Project

Argentine Re-public

Ministry of Federal Planning, Investment and Infrastructure Argentina 110 6/6/2006 YES YES

CO Sustainable Development Inv Project

Government of Columbia

Ministry of Environment, Housing and Regional Development Columbia 7 10/27/2005 YES NO

Bahia State Integrated Project: Rural Poverty State of Bahia CAR/SEPLAN Brazil 54.35 9/1/2005 NO YES

Modernization of the Water and Sanitation Sector Technical Assistance Project

Government of Mexico

CNA (Comision Nacional de Agua) Mexico 25 8/4/2005 YES YES

GY (CRL) Water Sector Consolidation Project

Government of Guyana

Guyana Water Company Guyana 11.5 7/28/2005 YES YES

Barrio-Ciudad ProjectGovernment of Honduras

Honduran Social Investment Fund (FHIS) Honduras 15 7/7/2005 YES YES

St. Lucia Water Supply Infrastructure Improvement

Government of St. Lucia Ministry of Finance St. Lucia 7.7 5/19/2005 YES YES

MX-Decentralized Infrastructure Reform and Development Loan

Estado de Guanajuato & Other Sources BANOBRAS Mexico 108 6/8/2004 YES YES

Total percentages

70% of loans promote privatization

78% of loans promote cost recovery

Food & Water Watch

29

Endnotes

1 Pipe Dreams: The Failure of the Private Sector to Invest in Water Services in Developing Countries, Public Services International Research Unit and WDM, March 2006, p. 48-49.

2 Ibid. p. 51.

3 Ibid. p. 51.

4 See: siteresources.worldbank.org/INTSDNETWORK/Resources/4.pdf

5 Global Environment Outlook 3, UNEP, Nairobi, 2002

6 Peter H. Gleick, “The Millennium Development Goals for Water: Crucial Objectives, Inadequate Commitments,” Pacific Institute, 2004.

7 United Nations Economic and Social Commission, Human Settlements Program, “The Poor Pay More.” See complete study at: http://www.unescap.org/huset/urban_poverty/poorpaymore.htm

8 World Resources 1996-1997, WRI, New York. Cited in WRI et al., World Resources Report 2000 — 2001, Washington DC, 2000.

9 See World Health Organization at: www.who.int/water_sanitation_health/mdg1/en/index.html

10 Ibid.

11 Peter H. Gleick, “The Millennium Development Goals for Water: Crucial Objectives, Inadequate Commitments,” Pacific Institute, 2004.

12 Barlow, Maude. “Blue Covenant: The Global Water Crisis and the Coming Battle for the Right to Water.” The New Press, 2007. p 6.

13 Ibid.

14 Barlow, Maude. Op. cit., p. 10.

15 “Suez introduces its 2003-2004 action plan; refocus, reduce debt, increase profitability,” Jan. 9, 2003 http://www.suez.com/upload/up970.pdf

16 See map at: www.debtireland.org/resources/Failing_the_poor_Map_10.05.pdf

17 2002 Results, presentation to shareholders, March 6, 2003 http://www.suez.com/documents/english/suez_ra_2002_va.pdf

18 See Executive Summary of Camdessus Report, “Financing Water for All,” at: http://www.financingwaterforall.org/index.php?id=1098

19 http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTWAT/0,,contentMDK:21706928~menuPK:4602430~pagePK:148956~piPK:216618~theSitePK:4602123,00.html

20 Nuria Molina and Peter Chowla, “The World Bank and Water Privatisation: Public Money Down the Drain,” Bretton Woods Project, Sept. 2008 at: www.brettonwoodsproject.org/art-562458

21 “IFC sees big market for H2O,” David Ehrlich, Cleantech, August 2008 at: http://cleantech.com/news/3282/ifc-sees-big-market-h2o

22 Ibid.

23 “Does Private Sector Participation Improve Performance in Electricity and Water Distribution?” World Bank and Public-Private Infrastructure Advisory Facility, 2009, p. 4

24 http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTWAT/0,,contentMDK:21662768~menuPK:4620645~pagePK:210058~piPK:210062~theSitePK:4602123,00.html

25 Spronk, Susan. “Another Hole in the Boat: Suez’s Private Corruption in Bolivia,” Z magazine, July 2006. See: http://www.zmag.org/znet/viewArticle/3493

26 Ibid.

27 “Despues del Triumfo de El Alto en Bolivia,” FEJUVE (undated) and; 14 razones para romper el contrato de Aguas de Illimani, FEJUVE (undated).

28 Chavez, Franz. “Bolivia: Protests spread over foreign ownership of water,” Inter Press Service, March 16, 2005.

29 Many privatization contracts include a clause that permits the company to resolve disputes in international arbitration courts. One such court, ICSID, is run by the World Bank.

30 Regulatory Audit with Technical, Environmental, Economic, Financial, Legal and Commercial aspects regarding compliance with the Concession Contract of Aguas de Illimani, S.A. (AISA) by Pozo y Asociados, May 2006.

31 For background see: http://democracyctr.org/bolivia/investigations/water/

32 See: http://www.miga.org/projects/index_sv.cfm?pid=466

33 “Support from the Inter-American Development Bank Group 1990-2005,” IDB Sustainable Development Department, Washington, D.C. March 2006, Table A-5 and; Inter-American Development Bank, project abstract for Interagua-Guayaquil Water and Sanitation Project, January 24, 2003.

34 “Tratamiento de aguas servidas no supera el 5% en plantas de Interagua,” El Universo, Guayaquil, Ecuador, June 8, 2002.

35 Enfermos por malos olores que salen de la planta de tratamiento de aguas servidas,” El Universo, Guayaquil, Ecuador, June 11, 2002.

36 Joiner, Emily. Murky Waters: A Critical and Purposeful Look at Water and Sanitation Services in Guayaquil, Ecuador. Observatorio Cuidadano de Servicios Publicos, Guayaquil, Ecuador, October 2007. See Chapter 6, pp. 77-90.

37 Ibid, p. 99.

38 “Observatorio Cuidadano planea demandar a Interagua ante Corte Interamericana,” El Universo, Guayaquil, Ecuador, April 15, 2008.

39 Ibid.

40 World Development Movement, press release, May 18, 2005 at: http://www.wdm.org.uk/news/archive/2005/biwatertanzan.htm

41 Tanzania Case Study, Human Rights and the Environment, Earth Justice at: http://www.earthjustice.org/our_work/issues/international/human_rights/case-studies/water_access.html

42 “Tanzania ditches private water supplier,” BBC News, May 18, 2005. See: http://news.bbc.co.uk/1/hi/business/4558725.stm

43 Misfortune 500, Biwater Profile, Women’s Environment and Development Organization at: http://www.misfortune500.org/company/Show.aspx?articleid=36

44 “Flagship water privatisation fails in Tanzania,” The Guardian, U.K., May 25, 2005 at: http://www.guardian.co.uk/politics/2005/may/25/uk.world

45 “Biwater fails in Tanzania damages claim,” The Guardian, U.K., July 28, 2008. See: http://www.guardian.co.uk/business/2008/jul/28/utilities.tanzania

46 “Biwater to pay $8 million in Tanzania Water Privatisation Case,” Public Services International. See: www.world-psi.org/TemplateEn.cfm?Section=Home&CONTENTID=19316&TEMPLATE=/ContentManagement/ContentDisplay.cfm

47 Op. cit. Multinational Monitor, Nov./Dec. 2008, Vol. 29, No. 3. See: http://www.multinationalmonitor.org/mm2008/112008/front.html

48 Ibid.

49 “Tanzania: Thirsty for Justice,” Multinational Monitor, Nov./Dec. 2008, Vol. 29, No. 3. See: http://www.multinationalmonitor.org/mm2008/112008/front.html

50 Ibid.

51 Ibid.

52 “Water and Politics in the Fall of Suharto,” The Center for Public Integrity, Washington, D.C. At: http://projects.publicintegrity.org/water/report.aspx?aid=52

53 “Indonesia: How not to privatize water,” Bill Guerin. Asia Times, Nov. 14, 2003 at: http://www.atimes.com/atimes/Southeast_Asia/EK14Ae01.html


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54 Op. cit. “Water and Politics in the Fall of Suharto,” The Center for Public Integrity, Washington, D.C.

55 “Current Situation of Jakarta Water Privatisation,” by Hamong Santono, People’s Coalition for the Right to Water. See: www.kruha.org

56 “Tap water gets 70 complaints a day,” Jakarta Post, Dec. 19, 2008 at: http://www.thejakartapost.com/news/2008/11/20/tap-water-gets-70-complaints-a-day.html

57 “KruHa: Struggling for the Right to Water,” 11.11.11 at: http://www.11.be/11/index.php?option=com_content&task=view&id=103072&Itemid=112

58 Ibid.

59 PPIAF was created by the World Bank and is managed by the World Bank, but most of its funding comes from donor governments.

60 http://www.ifc.org/ifcext/about.nsf/Content/History

61 Creating Opportunity: Highlights from IFC Annual Report, 2008, World Bank Group. See: http://www.ifc.org/ifcext/annualreport.nsf/Content/AR2008

62 Ibid., p. 1.

63 Ibid., p. 4.

64 European Double Standards, Olivier Hoedeman, Transnational Institute, March 2007 at: http://www.tni.org/detail_page.phtml?act_id=16533

65 See MIGA website at: www.miga.org/about/index_sv.cfm?stid=1588

66 See: www.miga.org/guarantees/index_sv.cfm

67 Http://www.ppiaf.org

68 World Development Movement, Media Briefing, May 2007 at: http://www.wdm.org.uk/campaigns/water/ppiaf.htm

69 http://www.ppiaf.org/content/view/182/168/

70 See PPIAF publications at: http://www.ppiaf.org/content/blogsection/11/485/

71 Gridlines, PPIAF newsletter, No. 14, Sept. 2006, page 1

72 Ibid, p. 3.

73 Ibid., p. 3.

74 See, for example: Gassner, Popov and Pushak, Does Private Sector Participation Improve Performance in Electricity and Water Distribution, PPIAF Trends and Policy Options, No. 6.

75 Pipe Dreams: The Failure of the Private Sector to Invest in Water Services in Developing Countries, Public Services International Research Unit and WDM, March 2006.

76 Op. cit. Gassner, Popov and Pushak, Does Private Sector Participation Improve Performance in Electricity and Water Distribution, p. 4.

77 Ibid., p. 4.

78 World Development Movement, Media Briefing, May 2007 at: http://www.wdm.org.uk/campaigns/water/ppiaf.htm

79 http://www.ppiaf.org/content/view/62/95/

80 Search Malawi water supply projects at the World Bank projects web site at: http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/

81 IDA, Malawi: Privatisation and Utilities Reform Project-(Credit No. 33950-MW), Proposed Amendment to the Development Credit Agreement, 2005.

82 Ibid., p. 27.

83 http://www.ppiaf.org/index.php?option=com_content&task=view&id=224&Itemid=214&sub_action=activities&action=show_projects_by_country&country=MALAWI

84 Ibid.

85 NGOs ask donors to drop World Bank water privatisation, Environment News Service, May 21, 2007.

86 Ibid.

87 http://www.corporateeurope.org/murkywater.html

88 http://www.tni.org/detail_page.phtml?act_id=16851

89 http://icsid.worldbank.org/ICSID/ICSID/AboutICSID_Home.jsp

90 Ibid.

91 Miller, Scott. “United States Suspends Trade Negotiations with Ecuador, U.S. Department of State,” May 17, 2006.

92 Challenging Corporate Investor Rule, Food & Water Watch and Institute of Policy Studies, April 2007, p. 5.

93 Latest Developments in Investor-State Dispute Settlement, IIA Monitor No. 4.” UNCTAD, New York and Geneva, 2006, p. 3.

94 Food & Water Watch spun off from Public Citizen in 2005 and became an independent organization.

95 “Will the World Bank Back Down?” Public Citizen, Washington, D.C. April 2004 at: http://www.foodandwaterwatch.org/water/pubs/reports/worldbank

96 Mason E. and Asher R. The World Bank Since Bretton Woods. The Brookings Institute, Washington D.C., 1973, p. 190.

97 “International Year of Freshwater: 2003.” United Nations. Available at: www.un.org/events/water/brochure.htm

98 Compiled from Project Information Documents (PIDs) and Project Appraisal Documents (PADs) available on the World Bank project database at: http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/

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