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The camouflaged variations of the privatisation move by the World Bank Group:
Public Private Partnerships and the Demand-Responsive Approach or CommunityDriven 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 DemandResponsive 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: “Demandresponsive” 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.