IFIs and Water Privatization

in Asia
Presented at the
International Peoples Forum vs. the IFIs
by the Jubilee South Asia Pacific Movement on Debt
and Development
16 September 2006
Batam Island, Indonesia
International financial institutions are clearly
the primary drivers of water privatization,
shaping policy environments through lending
criteria and conditionalities, funding the
projects that facilitate privatization, providing
expertise during implementation, and
extending loans and ensuring risk-free
investments for private corporations investing
in the water sector.
Not surprisingly, borrower-governments adopt
policies that would most likely lead to loan
approvals, and this includes compliance with
the Banks pro-water privatization directions
and strategies.

Privatization policies and projects are either

explicitly included as part of loan criteria and
conditionalities, or implicit in broader
economic policy prescriptions, or
implemented in order to meet fiscal targets
required by these institutions from borrowing
countries.
WB Country Assistance Strategies for the Philippines,
Bangladesh, Indonesia, Nepal, Sri Lanka, Thailand and
India, for example, are clear on pursuing the
privatization program
restructuring state-owned enterprises
aggressively promoting private sector participation in
infrastructure
redefining the role of the state such that its interventions
are limited and there are greater opportunities for the
private sector to cash in on the potential profits from the
water sector
introducing private sector-friendly legislation
instituting full cost recovery measures
supporting foreign direct investments by providing political
risk guarantees to investors in new projects, etc.
World Bank Water Supply and Sanitation
Investment Operations As of 2003

Region No. of Operations Total net Commitment

(US$ millions)

AFRICA 17 827.3
MIDDLE EAST and NORTH AFRICA 9 583.0
EAST ASIA & the PACIFIC 22 2,148.8
SOUTH ASIA 97 772.2
LATIN AMERICA and the CARIBBEAN 10 1,069.9
EUROPE and CENTRAL ASIA 21 564.1
5,965.3
 Project Approvals for Fiscal Year 2004-05:
(IBRD/IDA Product lines of the World Bank)

India - Karnataka Urban Sector Improvement Project

(US$51.53 million)

China - Hai Basin Integrated Water and Environment

Management Project ($33.32 million)

Bangladesh Water Supply Program Project ($55.11

million)

Nepal Second Rural Water Supply and Sanitation

Project ($41.5 million)
 World Bank Commitments
from 1999-2003

Total amount of new commitment from the WB

(IBRD/IDA) (Fiscal Year 2003) dedicated to
water supply and sanitation components in
World Bank operations: $5.14 billion
East Asia gets close to a third of new WSS
Business. Africa's share has also
grown to amount for as large of a share
of new WSS business as Latin America.

South Asia
7%
Middle East & N. Africa
10%
East Europe & C. Asia
11%
Latin America
20%
Africa
20%
East Asia & Pacific
32%
 Average
water share
of ADB
Lending

Over $15 billion or about 19 percent of ADB'S total lending has

been invested in water projects. Looking at some figures on
annual lending for water from 1968, this rose from $74 million
(1968-1975) to $875 million (1992-1999).
The IFIs and the WTO: Increasing Harmonization
WTO-GATS: the latest mechanisms for the privatization and
globalization of services and utilities. South countries are being
pressured to give up what little barriers are left for the full entry of
international corporations and investors in energy, environment,
water, education, health and other service sectors.

As borrower-governments liberalize public services, as prompted by

following IFI loan conditionalities, it becomes easier for private
corporations to encroach on water sectors especially of South
countries. Water resources and services, recognized as crucial to
development, are particularly in danger of commodification and
privatization under GATS.
 Global Water Corporations
European water giants have already been making large
investments in many countries in Asia, Africa and Latin America.
Clearly, the interests of firms like Suez, Vivendi and Thames
Water are behind the European Unions push for the inclusion of
water services in the coverage of GATS.

Through the enabling policy environments promoted by IFIs

and/or implemented by client governments, three of the biggest
companies in the world are already involved and continue to
deepen and strengthen their hold on water sectors across the
region:

SUEZ known in other countries as Ondeo (French)

RWE-THAMES (German and British)
Vivendi (French)
 National Governments
National governments across the region have put in
place, or are strengthening enabling policy
environments for greater private sector involvement
in the water industry.

Water sector reform bills are being passed or existing

national water laws are being amended to reflect the
IFIs stress on greater private participation as a
solution to degraded resources, increasing pressure
and demand, and bankrupt government agencies.
 NEPAL
Government is committed to reform the sector
to strengthen the role of the public in policy
and regulation and improve accountability by
delegating service delivery to the private sector
under a management lease contract.
1997: privatized management of the water
supply in the Kathmandu Valley.
INDIA
2002: Government announced the
adoption of a new National Water Policy,
superseding the earlier policy of 1987; it
lays great emphasis on encouraging
private sector participation in water
resource projects. Private sector
participation is promoted in planning,
development and management of water
resources projects for diverse uses.
SRI LANKA
The Governments reform process encourages
the private sector to enter into partnership with
the Government to operate, maintain, and
expand water services to improve operational
efficiency, and provide finance.
2001 Pilot Private Sector Participation (PSP)
projects: Greater Negambo and the Kalutara to
Galle Coastal Strip were selected for
immediate implementation.
BANGLADESH KOREA CHINA
The government has begun restructuring key Korean government changed its laws to Shift towards privatization in
water agencies following the drafting of the accelerate water sector reforms. Natl the 90s
National Water Policy drafted in 1990 that agency on water is mandated to enter 2000, government adopted
encourages direct investments for addressing into contracts with private companies in water market reforms; tariffs and
specific problems of market failure; and the form of public-private partnerships. wastewater treatment fees rose;
private participation in the implementation public water infrastructure
of national agencies mandates. opened to foreign and local
investors.
2002: the Water Resource Law
was revised to make the water
market more attractive to
investors.
Various forms of public and
private partnerships now
existing.
Significant amounts of new
water infrastructure to be built.
Operation and maintenance of
all existing and newly built
municipal water and water
treatment plants to be transferred
to private enterprises
PHILIPPINES
Privatization of the MWSS in 1997
Increasing financing by IFIs of local
governments water projects
Privatization of water systems in leading
economic zones
MALAYSIA Privatization of local water districts has
Government has issued a begun
directive stating that THAILAND
companies undertaking raw Enacted a Water Law and applies
water treatment must also be policies on cost recovery; strong
INDONESIA
involved in water direction towards privatizing
WBs Water & Sanitation Loan provides
distribution. From mostly irrigation systems
balance of payments assistance to support
Build-Operate-Transfer policy, legal, regulatory, and
projects in the early 1990s,
government policy shifted to
administrative reforms in the water
resources and irrigation sector. Enabling policy
PSP in the whole system, Privatization of PAM Jaya in 1998
from source to consumer. Increasing pressure to privatize more than environments for
300 local water utilities
The new law has been passed, despite
being contested by civil society.
Water Privatization
in Asia
Sri Lanka:
With ADB support, a National Water Resources
Policy was approved in March 2000.
A National Policy on Private Sector Participation
(PSP) in Water Supply and Sanitation was approved
in 2001. With World Bank support, the government
identified several urban water supply schemes for
PSP in various parts of Sri Lanka.
In December 2004, the Cabinet approved a new
water policy that promotes commercialization of the
water sector.
Nepal
In 1998, a National Water Supply and Sanitation
Sector Policy was crafted which supports PSP in the
operation and management of water supply and
sanitation services in Kathmandu Valley towns.
Similarly, the Kathmandu Valley Water Supply and
Sanitation Strategy was developed; it includes full
cost recovery for urban water supplies and
integration of sanitation with water supply.
PSP is also a precondition for the Banks support to
the controversial US$464-million Melamchi Water
Supply Project, approved in December 2000 with
cofinancing from JBIC and other donors.
Indonesia
In February 2004, the Indonesian Parliament approved a new
Water Resources Law. Critics of the law argue that it could
result in higher prices, thereby limiting peoples access to water.

In June 2004, a peoples coalition on water filed a case in the

newly-formed Constitutional Court for a Judicial Review of the
law. But the law was upheld as constitutional in 2005.

The government has been set working on privatizing some 300

state-run regional water companies across the country.

The water law is a condition of a US$300-million program loan

from the World Bank, known as WATSAL, or Water Resources
Sector Adjustment Loan, which aims to promote PSP in
Indonesias water sector.
Philippines
- privatization of the largest water district in 1997
(Metropolitan Waterworks and Sewerage System)
- Hailed as the largest privatization undertaking in the
region
- IFC designed the bidding process for the privatization
($6.2 million)
- Adaptable Program Loan instrument of the WB used
for the first time, for water-related loans, including a
$280 million loan to open the 1000 Philippine water
districts
- MWSS Water rates have already risen at least 8
times since 1997
Stop financing the privatization of
basic services!

People before profit!

Defend our right to water!

End IMF-WB intervention and
imposition of neoliberal policies