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Africa Policy E-Journal
Africa: Privatization and World Bank Africa Policy Electronic Distribution List: an information service provided by AFRICA ACTION (incorporating the Africa Policy Information Center, The Africa Fund, and the American Committee on Africa). Find more information for action for Africa at http://www.africapolicy.org +++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide SUMMARY CONTENTS:
This posting contains (1) a request for organizational sign-ons to
letters from the Ghana National Coalition against Privatisation of
Water, and (2) a background article on World Bank policies on
privatization of public services from the Globalization Challenge
Initiative. Additional related background information and links can
be found in earlier postings at
Water in Public Hands: Public sector water management, June 2001,
which presents evidence in favor of strong public sector
involvement as opposed to indiscriminate privatization, is
available, in Word format, at: A new factsheet with questions and answers on The World Bank and Denial of Africa's Right to Health is available at: http://www.africapolicy.org/action/wb0110.htm +++++++++++++++++end profile++++++++++++++++++++++++++++++ Ghana National Coalition Against Privatisation of Water c/o Integrated Social Development Centre (ISODEC), P.O. Box 19452, Accra North, Ghana; Email: isodec@ghana.com or ramenga@isodec.org.gh; Fax: 233/21 311687; Tel: 233/21 30606 [For additional information in U.S. contact: Globalization Challenge Initiative (http://www.challengeglobalization.org; sgrusky@igc.org; tel: 301-445-5205)]
Request for Organizational Signatures on Letter Dear Sisters and Brothers around the World: We call upon organizations and individuals around the world to express their international solidarity with the struggle of the Ghanaian people to stop the privatisation of the Accra-Tema water service. World Bank and International Monetary Fund (IMF) policies require the Government of Ghana to increase water tariffs (consumer fees for water) and privatise water in order to gain access to external assistance and soft loans. Five multinational corporations have bid for the Accra-Tema water service, most of them with annual sales income larger than the GDP of Ghana, and some of them with questionable social and environmental records. The Christian Council of Ghana, The Trade Union Congress, the Ghana National Association of Teachers, the Ghana Registered Nurses Association, the Convention People's Party and many other groups in Ghana have joined to stop the water privatization. Express your solidarity! Show your support for the struggle to stop the world-wide attempt to commodify water for the profit and benefit of a few. Sign on to the letters below to the IMF, the World Bank and the President of Ghana by sending your name and organizational affiliation to waterforall@igc.org Sincerely, Ghana National Coalition Against Privatisation of Water Letter 1
To: Mr. Callisto Madavo
Mr. Peter Harrold, We, the undersigned citizen's organizations from around the world, support the right of the citizen's of Ghana to participate in public debate, discussion and decision-making about whether the proposed leasing of the Accra-Tema water system to private transnational corporations (privatisation or private sector participation) is the best way to promote accessible and affordable water and to ensure public health, social equity and environmental sustainability. There is widespread international concern about privatisation and cost recovery policies that treat water primarily as a commodity, or an economic good, to be bought and sold in the marketplace. There is concern that such policies increase the obstacles to clean and affordable water to which every person, rich or poor, man or woman, child or adult, is entitled. Clean water is essential to human life and a natural resource that should be held as a public trust for the common good of our societies and the environment. We call upon the World Bank, in order to promote safe and affordable water for all people, and to support sovereign, democratic and participatory decision-making processes, to undertake the following:
We hope that you will be able to respond promptly and affirmatively to these concerns. The World Bank has publicly committed itself to making poverty reduction central and to promoting genuine national ownership of policies. This requires, among other things, supporting genuine processes of national debate, discussion, and citizen participation in policy decision-making, even when the policy choices being discussed may not be in consonance with World Bank opinion. Sincerely, Cc: Mr. James Wolfensohn, President, World Bank Letter 2
His Excellency Mr. J.A. Kufuor Dear President Kufuor, We, the undersigned citizen's organizations from around the world, support the right of citizen's of Ghana to participate in public debate, discussion and decision-making about whether the proposed leasing of the Accra-Tema water system to private transnational corporations (privatisation or private sector participation) is the best way to promote accessible and affordable water and to ensure public health, social equity and environmental sustainability. There is widespread international concern about privatisation and cost recovery policies that treat water primarily as a commodity, or an economic good, to be bought and sold in the marketplace. There is concern that such policies increase the obstacles to clean and affordable water to which every person, rich or poor, man or woman, child or adult, is entitled. Clean water is essential to human life and a natural resource that should be held as a public trust for the common good of our societies and the environment. We call upon you to support transparent discussion and debate, and participatory decision making processes regarding the management of water, by implementing the proposals below:
Sincerely, Letter 3
To: Mr. G.E. Gondwe
Mr. Hugh Bredenkamp We, the undersigned citizen's organizations from around the world, support the right of the citizen's of Ghana to participate in public debate, discussion and decision-making about whether the proposed leasing of the Accra-Tema water system to private transnational corporations (privatisation or private sector participation) is the best way to promote accessible and affordable water and to ensure public health, social equity and environmental sustainability. There is widespread international concern about IMF policy conditions that impose full cost recovery as a step toward the privatization of public water utilities. There is concern that policies such as full cost recovery can increase the cost of water for low-income and marginalized populations. Clean water is essential to human life and a natural resource that should be held as a public trust for the common good of our societies and the environment. We call upon the International Monetary Fund, in order to promote safe and affordable water for all people, and to support sovereign, democratic and participatory decision-making processes, to undertake the following:
We hope that you will be able to respond promptly and affirmatively to these concerns. Sincerely,
Economic Justice News Vol. 4, No.3 October, 2001 Service Apartheid: The World Bank's Private Sector Development Strategy and the PRSP by Nancy Alexander, Globalization Challenge Initiative The World Bank is soon likely to adopt a private sector development (PSD) strategy that will require the inclusion of the private sector in all infrastructure and social sector operations in the 78 low-income countries that depend on credits from the International Development Association (IDA). The PSD strategy threatens citizenship rights, jeopardizes affordable basic service provision and promotes a two-tier "separate and unequal" apartheid of access to basic services. The World Bank should increase support for social investments by credits, debt reduction, etc. But in country after country, the World Bank-supported push to privatize health, education, and water systems is putting services out of the reach of ordinary people - and pushing control over public assets into the hands of multinational corporations. Increasingly, the Bank is reorienting lending to support private corporations, which means that its private sector portfolio and profitability grow as its policy "conditions" are adopted. Alarmingly, such changes could be irreversible - "locked in" under trade liberalization agreements such as the General Agreement on Trade in Services (GATS). Once governments allow competition in basic service sectors, GATS disciplines apply to such sectors and to government rules "affecting" such sectors. These disciplines would, among other things, bar a government from favoring a domestic provider or providers, from limiting foreign ownership and control, from limiting expansion of services or access to basic governmental or regulated "monopoly" infrastructure, e.g., drinking water and sanitation networks, power lines, possibly school and hospital systems. This outcome could come at high democratic, budgetary and developmental cost. Citizens and governments in poor countries need more, not less, control over provision of basic needs. Even in developed countries with sophisticated regulatory systems, "private-public partnerships" - through contractual and other arrangements promoted as fostering competition and efficiency in basic services or key support services have, among other things, been costly to transact and to finance, have reduced budget flexibility over long periods of time, and have degraded public capability and introduced conflicts of interest. In countries with underdeveloped regulatory regimes, limited financial resources, and other weaknesses, liberalization of basic services can lead, not to healthy competition, but to the replacement of local public monopolies with multinational private monopolies or cartels such as the foreign for-profit international water giant Suez des Eaux. Such providers lack accountability to domestic consumers, citizens and governments. The PSD strategy could: 1) undermine basic citizenship rights in borrowing countries. Citizens have a right to determine their government's role in service delivery. Citizens also have rights to basic services, such as health, education and basic levels of water, sanitation and energy. Cash-strapped borrowers should not be coerced, especially in ways that short-circuit domestic decision-making. 2) widen the gap between rich and poor. The PSD strategy seeks to attract investment capital to poor countries by carving out lucrative markets. "Cherry picking" richer customers would leave the poor to be served by an impoverished public water, power, health or school system. This could create systems of separate and very unequal services. The same is true of long-term service contracts that give discretion to the contractor where to cut cost, reduce service or impose fees. And contracts for specific services that guarantee attractive rates of return by guaranteeing long-term demand for services creates obstacles to healthy competition. Auctions to provide services are rarely a winning strategy - whether the service is water quality or airline security - given the built-in incentives to reduce service quality. Finally, replacing universal service systems with segregated for-profit and subsidized loss-making systems ignores the fact that, as a rule, subsidy and exemption systems have failed to reach their targets - the people who need them. Even so, the Bank directs that "targeted subsidies are, if feasible, preferable to free provision." (World Bank Group, "PSD: Entrepreneurship, Markets and Development," May 9, 2001) This recommendation flies in the face of the U.S. Congress's demand, articulated in legislation last year, that the U.S. representatives at the World Bank and the regional development banks oppose any loans for basic services such as primary health care and primary education if they require "user fees" - charges that even the impoverished must pay. "Exemption systems," which aspire to locate the worst-off and certify them for free services, have almost never worked. 3) undermine efforts to foster homegrown development planning in borrowing countries. Since 1999, the IMF and World Bank have required each IDA borrower to prepare a development plan called a "Poverty Reduction Strategy Paper" (PRSP) that is acceptable to the Boards of the IMF and World Bank. Governments are asked to prepare their PRSP (preferably with input from citizens' groups) in order to qualify for concessional loans, grants, or debt reduction. Among other things, the PRSP demonstrates how fiscal resources (including resources freed up through debt reduction) are channeled into poverty reduction efforts, such as effective social service provision. In PRSP processes, citizens' groups invariably call for universal access to high-quality public services. But they are discovering—as in a recent water-privatization loan for Uganda and a privatized education loan for Burkina Faso — that the World Bank sees privatization as the answer to nearly every infrastructure or social sector problem. This raises serious doubt about the genuineness of the public consultation process for PRSPs. 4) endanger service provision and risk lives and livelihoods. In the past, the World Bank has insisted that privatization should be undertaken under the conditions that promote competition, discourage monopolies and where a strong regulatory system exists. Now, the World Bank has changed its tune. Its draft PSD strategy suggests that, in many cases, the weaker the regulatory structure in a country, the stronger the argument for free entry [by foreign corporations]. Privatization in an unregulated environment is a recipe for disaster. Low-income countries generally lack the competitive and well-regulated markets that are required to prevent rampant abuses (e.g. in Eastern Europe and the former Soviet Union, robber barons transformed public monopolies into private monopolies. Even where regulatory mechanisms are in place, the IMF and the World Bank do not always encourage protection of poor and vulnerable populations. Surveys of borrowers and Bank staff alike rank IDA as relatively ineffective in improving the status of the poor. This is clear in the case of Ghana where water tariffs have doubled in mid-2001 and are due to increase further. Still, the IMF and World Bank insist that Ghana's economy does not have the luxury of raising prices gradually or shielding consumers from price hikes: rates must be adjusted immediately to restore equilibrium. Action Needed Donor governments are currently finalizing policy directives for IDA as they prepare for a new round of contributions. IDA deputies - usually officials in finance or foreign ministries - should reconsider the PSD policy and call for small-scale experimentation. With IDA having already found that PSD projects do not effectively reduce poverty and are hampered by inattention to regulatory structures, the IDA deputies should insist that the World Bank thoroughly recast the proposed PSD strategy. See http://www.challengeglobalization.org for a list of IDA Deputies and details on how to contact them.
Documents previously distributed in the e-journal are
available on the Africa Action website: To be added to or dropped from the e-journal subscription list, write to e-journal@africaaction.org. For more information about reposted material, please contact directly the source mentioned in the posting.
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Africa Policy E-Journal
