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A bid ... for water

What is it about the Camdessus report on financing water infrastructure that raises hackles? DARRYL D'MONTE reflects on the proceedings of the Third World Water Forum held in Japan recently.

IF evidence was needed that civil society is not prepared to accept the privatisation of water, it was the virtual take-over of the dais during a panel presentation of what is known as the Camdessus report on financing water infrastructure at the Third World Water Forum (March 16 to 23), which was held in Kyoto, Shiga and Osaka, Japan. Mr. Camdessus is the former head of the International Monetary Fund which, along with the World Bank, has spearheaded structural adjustment programmes throughout the world, leading to catastrophes like the East Asian crisis and, more recently, the collapse of Argentina's economy.



A resource that gushes profit.

While Mr. Camdessus presented his report, noting how "the numbers (of those without water and sanitation) convey the cry of enormous injustice" all over the world, activists in the huge hall waved placards, accusing him of uttering lies. There were tiny bells attached to the placards and they tinkled gently, lending a curiously placatory note to the proceedings. He and other speakers carried on regardless but when Ravi Narayanan — an Indian who is director of the London-based NGO, Water Aid, and also served on the Camdessus group — was speaking, the activists clambered on to the stage and shielded the speakers from the audience by holding long banners in front of them, proclaiming: "Water for Life and not for Profit!".

The activists included Vandana Shiva and Oscar Silvera, who has led the people of Cochabamba city in Bolivia to cancel a private concession to deliver water. Hideaki Oda, Secretary General of the Kyoto Forum, had to appeal for order and the activists left. This was reminiscent of the previous forum in 2000 at The Hague, when Prince William of the Netherlands had to make a similar appeal when, much more sensationally, a Spanish man and woman stripped stark naked in front of the speakers at the inauguration to protest against a dam! Mr. Narayanan resumed, remarking caustically that, unlike the protestors, he was not claiming to represent the whole of humanity ... .

What is it about the Camdessus report that raises people's hackles? Its first thrust is to call for a doubling of financial flows into the water sector, supposedly to meet the U.N. Millennium Development Goals of halving the numbers of those without access to water (1.2 billion) and sanitation (2.4 billion) by 2015. This is unexceptionable, since the connection between the provision of these two most basic amenities and people's well-being is well understood. According to the Camdessus report, these funds would come from "financial markets, from water authorities themselves through tariffs, from Multilateral Financial Institutions, from governments, and from public development aid, preferably in the form of grants".

The timing of this appeal for greater funding for water is no accident. In many parts of the world, private water companies — the two biggest of which are Suez-Ondeo and Vivendi, both French, with RWE from Germany, which has bought Thames Water from the U.K. — are on the retreat, facing opposition from consumers and heavy financial risks due to foreign exchange volatility. Manila and Buenos Aires are two prime examples, while Ondeo has recently pulled out after unsuccessful attempts in India. According to Olivier Hoedeman of Corporate Europe Observatory, a watchdog organisation, "After a decade of sweeping privatisation, 460 million people around the world are now supplied water by private corporations (up from just 51 million in 1990). Water industry analysts expect the privatisation trend to accelerate and predict the number to reach 1.6 billion people in 2015.

"Whereas the water corporations during the 1990s primarily conquered newly privatised markets in developing countries, their focus is now increasingly shifting to the more predictable and profitable consumers in Europe — the U.S. and presumably Japan." These countries, with the exception of France, till today retain the delivery of water in the public domain, but — faced with growing uncertainties in the developing world — this may soon change. At Kyoto, activists cited opposition to privatisation in the U.S. Atlanta cancelled a 20-year-old contract this January due to poor service. A concession has been thwarted, for the time being, in New Orleans. In Detroit, as Michele Tingling-Clemons from the Michigan Welfare Rights Organisation told this writer, opponents are concerned that the poor will subsidise the rich. Penny Bright voiced the same fears regarding Auckland in New Zealand and regaled delegates by demonstrating how to sabotage the metering of water.

However, developing countries still present a huge market. Vivendi, the world's largest company, saw its Asian sales double to $647 million last year and China and India are the biggest prizes. The second thrust of the Camdessus report is to minimise the risk to foreign investors of exchange fluctuations. It advocates a "devaluation liquidity backstopping facility" and proposes a revolving fund to address the problem of the large fixed costs of preparing private participation contracts and tenders. "Governments taking up options to grant private concessions should provide adequate safeguards to create investors' trust and confidence in the sustainability of long-term contracts," the report states.

At a press meet with Mr. Camdessus the previous day, I asked him why what he terms "non-sovereign" entities, such as state governments and municipalities, should bear the risk of foreign exchange fluctuations when they have no control over such movements. "That's a typical Indian reaction!" he exclaimed, presumably referring to the barrage of criticism of previous International Monetary Fund (IMF) policies by Indians. He deflected the question by advocating that such organisations should go in for loans in local currencies to avoid these problems. He cited how the globe needed an additional $100 billion a year to meet the water and sanitation Millennium Goals, which was "daunting, but feasible".

The third thrust of the report is to channel aid — which has fallen to an average of $3.1 billion annually to water and sanitation in 1999-2001 from $3.5 billion in 1996-98 — through private hands. "The panel believes that water projects can be financed by combining funds with private financing in transparent and acceptable ways," the report says. "Overseas Development Assistance and Multilateral Financial Institution lending should be available to facilitate water projects managed by private operators under private control." This was criticised during the panel presentation by Agnes van Ardenne, Minister for Development Cooperation from Holland, one of the few countries which has met its target of providing 0.7 per cent of its GDP as aid.

There were objections raised by the International Rivers Network in Berkeley, California, which cited key recommendations to international financial institutions to increase guarantees and other public subsidies for private investors in water infrastructure and supply, as well as to "resume lending" for "dams and other major hydraulic works". This refers to the widespread opposition — over Sardar Sarovar in this country, among others — to big dams and, consequently, the reluctance of these institutions to fund such controversial projects.

Some years ago, a World Bank representative publicly acknowledged that its initial support (later withdrawn) to Sardar Sarovar was "one of the biggest public relations debacles" the bank had ever faced. (At another session, someone remarked: "Without the World Bank's intervention, white elephants would have become extinct long ago!") As several speakers mentioned at Kyoto, if irrigation accounts for the major use of water in developing countries — as high as 70 per cent in India and 60 per cent on average — wouldn't greater efficiency provide sufficient water for human needs? It costs $1,500 to grow a tonne of wheat in West Asia, almost five times the imported price.



'No' to water as an economic good.

Maude Barlow, from The Council of Canadians, which was instrumental in bringing several activists to Kyoto, stated: "Nothing is more crucial than the privatisation of this commodity: who owns and controls it. They are treating water as an economic good, where it will be governed by market principles and put on the market to the highest bidder. Some of the top 100 corporations in the world are in water and they are protected by powerful trade agreements. It's a question, in the end, of human rights versus corporate rights."

At a CEOs' Panel, Oscar Olivera from Cochabamba made no bones about the fact that "many of the people here are stained with the blood of our compatriots". He was referring to a consortium formed by the U.S. firm Bechtel (one of Enron's partners in Dabhol) and United Utilities of the U.K., which was awarded a contract four years ago to run the city's waterworks, without any bidding. The company announced tariff hikes of 150 per cent and threatened to cut off connections if anyone didn't pay. "They wanted to privatise the rain!" Olivera exclaimed. When protests erupted in 2000, the police and army were called in and five died in the rioting, forcing the government to cancel the concession.

Copies of a searing expose titled The Water Barons by the International Consortium of Investigative Journalists, created by the Centre for Public Integrity in Washington, were released in Kyoto. It documents how while private companies run only five per cent of the world's waterworks, they are in 56 countries. Vivendi earned $12 billion in water-related revenue last year. Thames Water, which uniquely and controversially has ownership of London's water assets, earned $2.5 billion. Suez has contracts in 130 countries with 115 million customers.

The Kyoto Ministerial declaration had this conclusion on privatisation: "We should explore the full range of financing arrangements including private sector participation in line with our national policies and priorities. We will identify and develop new mechanisms of public-private partnerships for the different actors involved, while ensuring the necessary public control and legal frameworks to protect the public interests, with a particular emphasis on protecting the interests of the poor." In U.N.-like-speak, it tried to balance the issue but privatisation remains very much on the global agenda.

Mr. Camdessus, in his post-International Monetary Fund (IMF) retirement, can be accused, in Thatcherite terms, of "batting for France" or its two water companies as a leading French ideologue. Mr. Jacques Chirac addressed the Kyoto Forum in a videotaped message to remind it that at the G-8 meeting in June — to be held in Evian, not surprisingly! — water will figure in deliberations.

Wars and water

AS someone who has presided over momentous events, former Soviet President Mikhail Gorbachev has the knack of putting controversial issues in perspective. He did this in Kyoto when he warned that wars can endanger water sources and, thereby, the lives of countless people. Safeguarding the water resources of Iraq was a cause of great concern today.

The U.N. Environmental Programme (UNEP) has already come out with an initial study of the ecological tasks after the conflict in Iraq. Former Mesopotamia, one of the cradles of civilisation, is fed by the Tigris and Euphrates rivers, but the wetlands and other riverine systems are at great risk due to excessive exploitation.

The UNEP has also released its findings regarding the ecological costs of the 1991 Gulf War, as well as the assessments of damage to ecosystems in Afghanistan and occupied territories in Palestine. As this writer learned from Palestinian sources, Israeli forces have not only occupied the heights of territories to harness rivers but discharged sewage and polluted water into Palestinian farms downstream.

Mr. Gorbachev called for "Water for Peace" and "Peace for Water". Contrary to the popular belief that the next world war will be over water, not oil — triggered off by a remark by former World Bank Vice-President Ismail Serageldin, now in the World Water Council — conflicts over water take a long time to build up. They do not present flashpoints, although they can remain a festering sore between hostile countries.

Not many may be aware that the Indus Water Treaty, now 43 years old, sharing the tributaries between India and Pakistan, has never been abrogated even during two wars. The agreement was brokered by the World Bank and remains a model for amicable sharing of resources. Shortsightedly, the Jammu and Kashmir legislative council has recently passed a resolution, asking the Centre to review the treaty. Local politicians have alleged that Kashmir suffers a loss of Rs. 6,500 crores due to it.

The experience with the Ganga Treaty with Bangladesh, over the Farakka barrage, has not been as harmonious, but it nevertheless addresses a long-standing dispute between the two countries. How Dhaka will react to the current Rs. 560,000 crore proposal to link all major northern and southern rivers in this country — a shocking example of gigantomania which ought to have been rejected in the light of the catastrophes associated with diverting rivers — is another matter.

The Mekong treaty, between Thailand, Cambodia, Laos and Vietnam, is yet another example where countries have chosen to cooperate on sharing resources. As Mr. Gorbachev appealed in Kyoto, "Water must become a powerful vehicle for peace." Without powerful agreements, it has the potential of being the opposite.

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