How development aid is driving water privatisation in the world's poorest countries
by Patrick Watt, policy officer, ActionAid UK
In Dar es Salaam, Tanzania, local television has been broadcasting a pop video extolling the benefits of the country’s contentious privatisation programme. Meanwhile, Tanzania’s top comedian is presenting a series of short dramas involving everyday situations encountered in the country’s under-resourced and inefficient public services. The punchline is not a joke. A voiceover explains that privatisation will solve the widespread water shortages by bringing in new money, expertise and competition.
The brains behind these stunts is Adam Smith International, the global consulting arm of the UK-based think tank. The money came from DFID, which in recent years has channelled more than a quarter of a million pounds of its allocation to Tanzania through Adam Smith International.
The use of substantial sums of UK aid money in one of the world’s poorest countries to swing the public behind a World Bank-led water privatisation may be surprising to UK taxpayers. But in reality it represents the soft end of the practice of donors using aid money to pressure poor countries into adopting risky and unproven reforms.
Dar es Salaam’s municipal water system was privatised in 2002. A British company, Biwater, was the only bidder in the final stages of the process, and the contract was awarded without any meaningful competition. The privatisation came about as a condition of aid being awarded to Tanzania by the International Monetary Fund (IMF). Together with the World Bank, the IMF operates as the linchpin of the international aid system.
Since the early 1980s, their lending programmes to poor countries have increasingly carried conditions that poor countries must meet in order to keep the money flowing. These conditions go far beyond the kinds of measures that help to ensure the efficient use of aid money. The goal of the Bank and Fund has been nothing less than a fundamental reordering of the economic system in countries such as Tanzania, reducing the size of the state and giving market forces a lead role in the allocation of resources.
But aid conditionality fails the poor, by pushing policies that often have more to do with donors’ ideological preoccupations than with the real needs of poor people. Recent water privatisations in countries such as Bolivia, the Philippines and South Africa have led to steep tariff rises, disconnections, social unrest and bail-outs by the taxpayer.
Proponents of water privatisation argue that the private sector is invariably more efficient. Yet even the World Bank’s own Operations Evaluation Department recently concluded that water projects without private sector participation were as likely to deliver improvements in access, efficiency and sustainability as those where the private sector was involved.
Increasingly, water companies themselves are recognising that the massive challenge of extending safe and affordable drinking water to the one billion people who currently go without must be met principally through a reformed and revitalised public sector.
Unfortunately, this message is not getting through to the international donors. It is time to drop the privatisation conditions, allow poor countries to make their own policy choices, and make aid work for poor people.
