Watch Out: The World Bank Is Quietly Funding a Massive Corporate Water Grab

By Scott Thill
AlterNet
Posted on November 2, 2010

Billions have been spent allowing corporations to profit from public water sources even though water privatization has been an epic failure in Latin America, Southeast Asia, North America, Africa and everywhere else it's been tried. But don't tell that to controversial loan-sharks at the World Bank. Last month, its private-sector funding arm International Finance Corporation (IFC) quietly dropped a cool 100 million euros ($139 million US) on Veolia Voda, the Eastern European subsidiary of Veolia, the world's largest private water corporation. Its latest target? Privatization of Eastern Europe's water resources.

"Veolia has made it clear that their business model is based on maximizing profits, not long-term investment," Joby Gelbspan, senior program coordinator for private-sector watchdog Corporate Accountability International, told AlterNet. "Both the World Bank and the transnational water companies like Veolia have clearly acknowledged they don't want to invest in the infrastructure necessary to improve water access in Eastern Europe. That's why this 100 million euro investment in Veolia Voda by the World Bank's private investment arm over the summer is so alarming. It's further evidence that the World Bank remains committed to water privatization, despite all evidence that this approach will not solve the world's water crisis."

All the evidence Veolia needs that water grabs are doomed exercises can be found in its birthplace of France, more popularly known as the heartland of water privatization. In June, the municipal administration of Paris reclaimed the City of Light's water services from both of its homegrown multinationals Veolia and Suez, after a torrent of controversy. That's just one of 40 re-municipilazations in France alone, which can be added to those in Africa, Asia, Latin America, North America and more in hopes of painting a not-so-pretty picture: Water privatization is ultimately both a horrific concept and a failed project.

"It's outrageous that the World Bank's IFC would continue to invest in corporate water privatizations when they are failing all over the world," Maude Barlow, chairwoman of Food and Water Watch and the author of Blue Covenant: The Global Water Crisis and the Fight for the Right to Water, told AlterNet. "A similar IFC investment in the Philippines is an unmitigated disaster. Local communities and their governments around the world are canceling their contracts with companies like Veolia because of cost overruns, worker layoffs and substandard service."

The Philippines is an excellent example of water privatization's broken model. After passing the Water Crisis Act in 1995, the Philippines landed a $283 million privatization plan managed partially by multinational giants like Suez and Bechtel. After some success, everything fell apart after 2000, and it wasn't long before tariff prices repeatedly increased, water service and quality worsened, and public opposition skyrocketed. Today, some Filipinos still don't have water connections, tariffs have increased from 300 to 700 percent in some regions, and outbreaks of cholera and gastroenteritis have cost lives and sickened hundreds.

"The World Bank has learned nothing from these disasters and continues to be blinded by an outdated ideology that only the unregulated market will solve the world's problems," added Barlow.

But asking the World Bank to learn from disaster would be akin to annihilating its overall mission, which is to capitalize on disaster in the developing world in pursuit of profit. Its nasty history of economic and environmental shock therapy sessions have severely wounded more than one country, and has been sharply criticized by brainiacs like Joseph Stiglitz, who was once the Bank's chief economist, and Naomi Klein, whose indispensable history The Shock Doctrine is a horrorshow of privatization nightmares. From its cultural imperialism and insensitivity to regional differences to its domination by a handful of economic elites drunk on deregulation, whose utter failure needs no further example than our continuing global economic crisis, the World Bank's good intentions have been compromised by an unending string of terrible press and crappier deals.

"In the past, the World Bank pushed privatization as the way to increase investment in basic infrastructure for water systems," said Gelbspan. "But since then bank officials have admitted that the transnational corporations don't want to invest in infrastructure, and instead want only to pare down operations and skim profits. The World Bank has lowered the bar, satisfied with so-called 'operational efficiency,' that cuts utility workforce, tightens up bill collections and shuts off people who can't pay."

That's been a recipe for failure and protest, especially in the very region that IFC and Veolia hope to pump for all its water worth. In 1998, World Bank loans were secured to upgrade the crumbling post-Soviet water system in Yerevan, a city in the Eastern European nation of Armenia. With a caveat: It had to be managed by a private contractor. The Italian transnational ACEA landed the job, but quickly failed to extend water access, partially thanks to company corruption. It also failed to properly maintain water pressure, allowing sewage to seep into the city's drinking water and sicken hundreds. Despite the travesty, the World Bank issued another contract in 2006 to Veolia, which hired ACEA's top executive. Two years later, only one in three Yerevan residents were lucky enough to score 24-hour water service, while contamination problems continued. Veolia's contract with the city is up for renewal in 2015.

The same goes for the Turkish city of Alacati, which landed a $13 million loan in the late '90s, as well as Veolia's incompetence. The city's water bills skyrocketed to 12 times the price of service in other parts of the country. Multiply that times most every nation or city that has privatized its water service, and you've got a good idea of why the World Bank's IFC is under fire for rapacious resource-snatching. And why the developing world is right to be wary of its good graces, although the World Bank can do good when it so chooses.

"The World Bank does not at all speak with one voice on their pro-privatization stance," Darcey O'Callaghan, Food and Water Watch's international policy director, explained to AlterNet. "One staff member referred to it as a bad experiment that has been proven wrong, while higher staffers try to take a more nuanced position, claiming that the Bank is neither for or against privatization but simply promotes the most appropriate model for specific communities. Unfortunately, our own statistics have shown that regardless of their statements, 52 percent of their projects between 2004 and 2008 promoted some form of privatization."

But rather than repair privatization's failed project at its source, the World Bank is simply spinning off its compromised philosophy to the IFC. So while the World Bank may be torn in its endorsement of water privatization, the IFC has no such reservations, in hopes of dodging the slings and arrows of public outcry, and perhaps legal liability.

"What's really scary," O'Callaghan added, "is that we are increasingly seeing the International Finance Corporation pick up where the Bank has left off in water privatization. The IFC is a Bank-sponsored institution whose goal is to promote the private sector, and because their financing also comes from the private sector, they can be more difficult to hold accountable. Worse yet, according to our 2000-2008 stats, 80 percent of IFC loans had gone to the four largest multinational water companies, further concentrating the global water industry."

It's not just water that's at the center of Earth's mounting resource wars. In late October, Britain's government announced it was looking to sell off its state-owned forests to counteract a yawning deficit. Today, natural gas companies are preparing to drill in America's national parks. Indeed, America and Britain's bungled occupation of Iraq is a protracted resource war for control of the embattled nation's oil reserves. Water is just one more natural resource, albeit the most important one, worth a killing to those seeking to callously leverage limited funds for innocent lives.

"Droughts and deserts are spreading in over 100 countries," Barlow said. "It is now clear that our world is running out of clean water, as the demand gallops ahead of supply. These water corporations, backed still by the World Bank, seek to take advantage of this crisis by taking more control over dwindling water supplies."

Which is another way of saying that, regardless of the refreshing trend toward re-municipalization, no one should expect the World Bank or its IFC untouchables to give up the privatization and deregulation ghost anytime soon. That means that every city, and citizen, is due for a day of reckoning of some sort, and should fight back against the bankrupt privatization paradigm with everything in its arsenal.

"Get involved at the local level," O'Callaghan said. "Know where your water comes from. Fight against privatization schemes. Promote conservation. Don't drink bottled water."

And Barlow adds, "The only path to a water-secure future is water conservation, source water protection, watershed restoration and the just and equitable sharing of the water resources of the planet. Water is a commons, a public trust and a human right and no one has the right to appropriate for profit when others are dying from lack of access."

Scott Thill runs the online mag Morphizm.com. His writing has appeared on Salon, XLR8R, All Music Guide, Wired and others.