World bank water projects in various Asian countries.
In January 1997, Manila opened the bidding for the privatization of the city’s Metropolitan Waterworks and Sewerage System (MWSS), Asia’s largest and, by some measures, the world’s largest water sector privatization to date.
MWSS, responsible for delivering water and sewerage services to Manila’s 11 million residents, invited private water groups to bid for two 25-year concessions, one for the city’s west side, one for the east.
Manila Water Co., won the eastern concession by promising a huge 74% cut in water rates. On the other hand, the Maynilad Water Services Inc., won the western zone with a promise to lower rates by 44%.
Both concessions would run for 25 years with the pledge that no rate increases will be implemented in the first 10 years of operation. Consequently, people welcomed the prospects of better and cheaper services but some keen observers already warned of the entry of old oligarchs and foreign capital into vital public utilities of the country.
Six years after the privatization, water fees were increased five times without corresponding improvements on water services and existing infrastructure. Water charges tripled in 2001 and in 2003 has an 81% increase in the eastern zone and 36% in the western district. As services become more expensive and inefficient, poorer households suffered. Similarly, millions of Filipinos are still not connected to piped water and almost 50% of the water supply is lost due to leakage and theft.
Water Districts Outside Metro Manila
The Local Water Utility Administration (LWUA) is in charge of managing water systems outside Metro Manila. The same agency exercises an exclusive right to provide water and collect fees from around 500 water districts nationwide. LWUA funds the construction of all water facilities from fees collected from consumers, loans from ADB and the World Bank and official development assistance (ODA). Local government units either on the provincial, city or municipal level appoint LWUA Board Members for each water district. LWUA is not a profit-making agency but its mode of operation is commercialized in the sense that it is allowed to recover its investments at full cost. As a consequence, LWUA only operates in urban areas where the population is huge and whose residents can afford to pay water services.
The Freedom from Debt Coalition monitors the socio-economic impact of local water districts that have been privatized. Some of these districts suffer the fate of Metro Manila residents who are paying higher water fees in exchange of poorer service.
Indonesia: Privatization of Jakarta Water Utilities
The World Bank’s involvement in water privatization in Jakarta started in June 1991, with a $92 million loan. The loan was used to build a new water purification installation at Pulogadung, Jakarta . Both the World Bank and the Overseas Economic Co-operation Fund of Japan advised the government to privatize its water utilities in Jakarta .
The privatization of Jakarta’s water is the story of powerful multinationals that deftly used the World Bank and a compliant dictatorship to grab control of a major city’s waterworks. In alliance with the Suharto family and Suharto cronies, Thames and Suez won favorable concessions without public consultation or bidding. As riots spread, the companies’ executives fled, according to Indonesian waterworks officials, exposing millions of Jakarta residents to a potential catastrophe. Eventually they returned and renegotiated their contracts under somewhat less generous terms. As for the ostensible reason for privatization — bringing water to the poor and improving the finances of the waterworks — the companies’ record is mixed.
World Bank Loan to Reform Water Policy
In 1998, the World Bank approved a $300 million loan to the Indonesian government. The proposed loan would support a structural adjustment program of policy, institutional, regulatory, legal, and organizational reforms in the management of the water resources and irrigation sector.
The World Bank placed two key conditions on the payment of the loan:
- A new Irrigation Policy, decentralizing the management of irrigation to farmers’ organizations. Decentralization means farmers will bear the cost of management and maintenance.
- A new Water Management Bill, which has caused widespread protest from NGOs, farmers, urban poor groups and academia. The main issues coming from the draft of the Bill are lack of protection of water rights of the community. Instead of giving a clear recognition and protection of water for people, it gives more access to private investment to have concession on water resources, from water surface and ground water.
Cambodia is remarkable for the number of private initiatives in water supply provision that have sprung up in urban and rural areas, encouraged by the weakness of public utilities and the absence of a regulatory regime. Outside Phnom Penh and Sihanoukville, almost all new investments in water supply networks have been made by local private investors, ranging from a few thousand dollars for villages of a few hundred families to $900,000 for the provincial town of Banteay Meanchey (population 100,000 in 2000). In 1997 and 1998, four private companies were granted concession rights for water supply in four large towns.
The concessions were granted without appropriate bidding, resulting in different privatization processes. The Government sees no need to add specific provisions to encourage service access for all because it assumes that the private sector automatically wants to sell water to the greatest number of people. Understandably, the private investors have established networks in the most densely populated urban and commercial neighborhoods, where the investment required is lowest and consumption is highest.
Households served by private utilities pay significantly more for piped water services, and some lower-income households that are not served by private utilities are partially limited by the high connection fees (as opposed to the regular monthly payments). Overall, while this recent effort to introduce private sector involvement in the water sector in Cambodia is encouraging, the full gains have not yet been realized.
Read more about the world bank’s involvement in natural resources
Source: P. Raja Siregar (2003) “World Bank and ADB’s role in privatizing water in Asia Region” presented at the Asia Pacific Conference on Debt and Privatization of Water and Power Service , held by Jubilee South/APMDD, in Bangkok 8-12 December. P. Raja Siregar is Coordinator of KAU/ Anti Debt Coalition-Indonesia. The author also works with WALHI (Friends of the Earth Indonesia) as Policy Campaigner. Any input, or suggestions can be sent to, or Information regarding KAU’s activity and issues available on: www.kau.or.id