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CounterPunch
September
4, 2002
Thirsty for
Justice
The Rush to Privatize Water
by Russell Mokhiber
and Robert Weissman
Shown the folly of over-reliance on markets even
in the world's richest country, the market fundamentalists at
the World Bank are continuing their push for privatization of
services -- with the provision of drinking water at the top of
the list -- in the developing world.
Water works plagued by poor service and
underinvestment can be rejuvenated by private water operators.
That according to the World Bank, a compromised consulting industry
and the private water industry -- dominated by the French firms
Suez and Vivendi -- itself.
But citizen movements across the planet
are rising to challenge the World Bank and corporate schemes
to wrest control of now-public water systems. Perhaps the hottest
flashpoint in the conflict between the people and the Water Barons
is in Ghana. There, the National Coalition Against the Privatization
of Water (NCAP of Water) is aggressively opposing a Bank-advocated
privatization scheme that would lease out the country's urban
water systems for a song. The scheme was hatched in 1995, and
may be implemented next year, unless NCAP can thwart it.
(A
newly released International Fact-Finding Mission assessment
of the Ghanaian privatization proposal is available here.)
To make the system generate enough revenue
to pay the operator -- a handful of international operators,
including Suez and Vivendi, are in the running to take over the
system -- the privatization scheme would require persistent rate
hikes. The goal is to achieve "cost recovery" --  tariff revenue sufficient
to meet operations and maintenance costs, without any public
subsidy to keep prices in check. This, even though systems in
the United States, among other industrialized countries, routinely
rely on support from general tax revenues.
Compounding the rate hikes, the privatization
scheme calls for the inclusion of an "automatic tariff adjustment"
-- with rates rising automatically to offset inflation and, most
importantly, currency devaluations. That makes sense from the
viewpoint of the foreign operator -- they will want to maintain
constant profits in dollar-denominated terms, not in cedis, the
local currency. But it is a disaster from the point of view of
Ghanaian consumers -- their cedi income does not go up just because
the value of the cedi declines. Assuming future devaluations,
Ghanaian consumers will find themselves paying a higher and higher
proportion of their income to the water company.
In exchange for certain, ongoing rate
hikes into the indefinite future, Ghana is supposed to benefit
from a more reliable and efficient system, and from expansion
of the piped water system to reach the millions of urban consumers
who are not connected to water pipes. But almost all of the evidence
suggests these promises will turn out to be illusions or deceptions.
First, the record of private water company
operation in developing countries is very poor. There is little
to suggest that private companies deliver "efficiencies"
in this area, though they are clearly skilled at extracting enormous
profits.
The details of the Ghanaian privatization
plans offer little comfort that things will be different in this
case.
There are some incentives built in the
proposal to increase the amount of water delivered -- many lower
income Ghanaians may get water from pipes only once every two
or four weeks -- but the proposed leasing terms would encourage
the private operator to improve service for high-volume richer
consumers, rather than low-volume poorer ones.
Achievement of water delivery and other
performance standards would be self-monitored by the private
water operator, overseen by a newly created regulatory agency
with little experience and little chance of effectively controlling
a giant multinational.
The proposed leasing arrangements impose
only the most minimal investment requirements on the private
operator (who would lease the system, rather than purchase it
outright) -- and the operator is guaranteed a return even on
that minimal investment, making it more of a loan than actual
investment. So the operator will offer almost nothing in terms
of new money for repairs or pipe expansion.
There is some new money promised in the
deal for pipe expansion. But the money will all be in the form
of new loans and some grants from the World Bank and donor countries.
The private operator does nothing to obtain these loans, and
has no pay-back obligations. This money -- desperately needed
for system expansion -- could be made available right now (or
could have been provided five years earlier), but the Bank and
donors have made the loans and grants conditional on privatization.
Even this money is far less than needed
to connect most urban Ghanaians to the piped water system. They
will continue to rely on exploitative private water tanker operators,
who buy water in bulk from the water utility, drive to areas
without piped water service and sell to consumers at rates five
or ten times that of price of piped water. The poorest people
in cities have no choice but to rely on these water sources,
and find themselves spending 10, 15 or even 20 percent of their
income on drinking water.
The tanker prices could easily be controlled.
The utility could operate tankers and sell tanker-provided water
at the piped water rate. Or the private tankers could be tolerated,
but required to sell water at a regulated price -- with the utility
refusing to sell water to those tanker operators who fail to
comply.
The World Bank has not considered these
approaches, and at least one pro-privatization consultant's document
suggests that such measures would interfere with the flourishing
private market in water provision!
NCAP of Water, like colleagues around
Africa and elsewhere in the developing world, rejects this market
fundamentalist illogic. They insist that drinking water be treated
as a right, not a commodity. Rather than inviting predatory multinationals
in to drive up prices, suck up profits, serve the urban elite,
and ignore the poor, they say, the public sector can and must
be reinvigorated to ensure decent delivery of water, one of life's
essentials.
Russell Mokhiber
is editor of the Washington, D.C.-based Corporate Crime Reporter.
Robert Weissman is editor of the Washington, D.C.-based
Multinational
Monitor, and co-director of Essential Action. They are
co-authors of Corporate
Predators: The Hunt for MegaProfits and the Attack on Democracy
(Monroe, Maine: Common Courage Press, 1999.)
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