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PrivatisationAlternatives / ReformsPublic-Public PartnershipsFinancing Public Water
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Oct 19 2004
Supplied or written by Uwe Hoering
The camouflaged variations of the privatisation move by the World Bank Group: Public Private Partnerships and the Demand-Responsive Approach or Community-Driven Development

Uwe Hoering, Weed, Bonn/Berlin, Germany

Comment at AEPF, Hanoi

Reading some of the recent statements of the World Bank, you get the impression that the Bank is retreating from privatisation. Since private sector investors are withdrawing from infrastructure in some countries of the South, high ranking World Bank officials like Nemat Safik, Vice-President for Infrastructure, admit, that they have been “too optimistic” regarding forthcoming private investments. Others play down the promises made earlier by the protagonists of privatisation as „oversimplified, over rated and finally disappointing as they promised more than has been kept“ (World Bank News, 16.06.2004).

So, is the World Bank really retreating? Not at all, quite the opposite is true. The Bank and other multilateral and bilateral development finance institutions are pushing even harder to give as much of the cake to the private sector as possible - inspite of the negative experiences and the growing resistance. But they have to rethink and to modify their strategy like they did for example in their new Water Resources Sector Strategy, WRSS. And we should analyse these changes carefully, so that we can counter them.
There is a whole range of new instruments in the World Bank Group like risk management for currency exchange fluctuations for private investors and new funds by the IBRD as well as by the private sector lending arm, the IFC. Here I just want to draw your attention to two of them with far reaching direct consequences for the people and civil society: Public Private Partnerships, sometimes labelled as Private Sector Participation, and the Demand-Responsive Approach or Community-Driven Development as the new approach for development projects in rural and peri-urban areas. Both could be considered as camouflaged variations of the privatisation move by the Bank.

As a response to the reluctance of private investors especially in the infrastructure sector but also in the social services there will be a strong push towards more Public-Private Partnerships by international organisations like the World Bank and the Asian Development Bank, but also by UN-Organisations and by the OECD, the organisation of the leading industrialised countries. These PPPs are an attempt to reduce the economic and political risks for private investors by shouldering much of the burden by the public but privatising the benefits. Already in the past a lot of public funds and capacities by World Bank and others development organisations have been employed to promote PPPs for example in the water and in the health sectors – with little positive results. And pushing PPPs further will mean that even more support will be given to these so called partnerships in future, thus reducing the public funds available for other actors like public utilities and Public-Public Partnerships, development NGOs or people’s organisations.

Looking at PPPs, there are several basic and very fundamental threats involved:
* Firstly, the concept of “Partnership” is changing the relations between public and private, the State and private capital fundamentally. Responsibilities of governments, multilateral institutions like World Bank or the UN are being shifted towards the private partners. Between the so-called partners, there are new vague values guiding the relationship like “mutual trust” and “good will” instead of control and regulation by laws or government orders. As a result of this, the implementation of public obligations and responsibilities becomes depend on the private interest, be it market access or profit, “blue washing” as in the case of the UN Global Compact, or influence on policies. So only those public interests will be realised, that are profitable as well. Government institutions become dependant on the strategies of their private partner.

* Secondly, experience shows, that agreements about Public-Private Partnerships or Private Sector Participation are often intransparent, undemocratic and biased in favour of narrow economic interests. So while the influence and control of private capital over government decisions is increasing, the space for democratic and civil society forces to influence and control development priorities and political decisions are being reduced.

* And finally, PPPs are an important stepping stone for further privatisation. One aspect is that they help private companies to get a foothold in the sector. But beyond that, the whole framework of State rules, laws and regulations is being changed to make them possible, thereby opening up the sector to further large-scale intrusion by private companies. So PPPs can be called the Trojan Horse of privatisation, allowing the troops of the private sector to sneak into the public fortress and pull down the defences.

While the role of PPP as part of the privatisation process is quite obvious, this is not so clear with the Demand-responsive Approach or Community-Driven Development Projects. For those, who are not familiar with this concept just a brief introduction: “Demand-responsive” means that user groups themselves shall decide about which kind of – let’s say - water supply system or sanitation facilities they want to have. They shall be in charge of everything from designing and planning to building or contracting out (to private companies) as well as to operation and maintenance. While government institutions will finance part of the initial investment, the user groups will have to raise money through user fees and tariffs for operation, maintenance and future repairs and replacement. That sounds quite like “ownership” and full participation. But again, the opposite is true.

The Demand-Responsive Approach has the same roots like privatisation: The concept of water as an economic good, the principle of cost recovery and the reduction of government spending for the sake of budget consolidation. The main difference is, that government responsibility is not being replaced by a private operator or investor but by the community or water user groups.
Whether this concept will work under the conditions of rural poverty and power relations is a big question mark. Pilot projects in Sri Lanka, India and a few African countries have at best shown mixed results: Initially, there can be some improvements in coverage and functioning. But due to non-affordability or non-payment by users there is no sustainability. Marginalised groups or women are often excluded from decisions as well as from improvements. Instead of “need”, the “demand” of consumers who can afford to pay for their supply becomes the criteria for the development of the supply system, very much like the profit motif of the private investor or operator in privatisation schemes.

In both cases, the World Bank is promoting a market driven commercialisation, that can not guarantee the right to water or other basic services for everybody. Furthermore, there is a perspective, that DRA-Projects in relatively better-off communities or regions may very well become attractive for private investors later on, thus paving the way for privatisation.
World Bank and others are pushing the Demand-Responsive Approach as the prime solution for rural and peri-urban areas, that means for populations who are normally underserved, but not attractive for private business, because they are poor. After heavy influence and pressure from the World Bank and the Water and Sanitation Program, controlled by the Bank, the new approach has already become official policy in new national Laws for rural water supply and sanitation in India and Sri Lanka.

Finally, looking at the broader picture of the water policy of the World Bank Group, the Demand-Responsive Approach turns out to be just the other side of the coin of the Bank’s new love for “high risk/high-benefit-projects”. After a decade, the World Bank announced recently, that it would start again to finance big infrastructure projects like Mega Dams, admitting that they involve high risks but would also bring high benefits for economic growth. And the Demand-Responsive Approach shall help to find the money for this: While poor people have to look for themselves how they get their basic services financed and organised, public funds from governments and international financial institutions can go increasingly towards profitable big projects. And that again means more privatisation, not less.

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