• Privatisation of services

Privatisation of services

This document discusses three main themes: how privatisation has been promoted by international financial institutions and other donors as a strategy for financing water services; the effects on the poor of different kinds of privatisation of water services in developing countries; and policy recommendations for the provision of water to the poor.

The report shows that the World Bank acknowledges the difficulties with privatisation, but remains wedded to its belief in the underlying rationale of private participation and continues to find new ways to encourage private investment. Case studies from Africa, Latin America and Asia, show that privatisation involving multinationals often leads to higher prices for the poor, disconnections and in some cases cancellation of contracts, leaving water infrastructure in a worse state than before. The reality on the ground contradicts the continued enthusiasm of international institutions and donors for privatisation as a solution to global water needs. Alternative forms of water management and provision, for example, local cooperatives and small-scale community-controlled initiatives, provide examples of different, more viable solutions.

The paper’s main conclusions are:

• water privatisation has failed to deliver to the poor
• water privatisation has undermined the human right to water
• water privatisation has taken place at the expense of democratic principles and with minimal accountability to local citizens
• privatisation leads to foreign control and monopoly
• developing countries have not proven profitable for multinational companies
• with strong and competent public authorities, private actors may have a role

Recommendations include:

• Regarding the international financial institutions:
  • ensure that water privatisation is not included as a condition for financial support from the World Bank or any of the IFIs
  • reduce support to institutions, funds and partnerships that, without exception, support private sector development in the water sector
• Regarding Norwegian bilateral aid:
  • ensure that recipient countries are not forced into privatisation
  • ensure that water privatisation is not made a condition of Norwegian multilateral and bilateral aid, loans or debt forgiveness
  • ensure that water supply is affordable for the poor
• Regarding WTO and GATS negotiations:
  • take the position that all countries should withdraw their requests to developing countries about privatisation of services in the water sector through the GATS agreement
  • renegotiate bilateral and regional trade and investment agreements which enable private water corporations to claim undue “compensation” from public authorities via arbitration cases.

[adapted from author]

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