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World Bank "trillions": More PPPs, even worse days of privatisation?

Posted on 23 August 2017

The World Bank and International Finance Corporation plaques, courtesy of Addy Cameron-Huff  with CC BY 2.0 license .

IBON International Statement on World Bank "billions to trillions"

The World Bank Group (WBG) is said to be “rethinking” its approach to development, with the major change being an ever bigger role for private sources (such as big investors) to finance development. This may be another significant step for the WBG after its call to move from “billions to trillions” in development financing in 2015. [1]

WBG President Jim Yong Kim alludes to this new direction in his recent speeches: (1) a rethinking of the role of the WB today as a “broker” -- a middleman -- between big businesses and developing countries; (2) the need to “de-risk” developing countries, that is, shaping a “safe” climate for huge corporate investments especially in conflict-affected states; and (3) the increasing role of public-private partnerships (PPPs) in infrastructure to bring development to the poor in these countries.

This discourse can be seen in recent WBG and International Monetary Fund (IMF) Spring Meetings [2], and especially in the 2017 Global Infrastructure Forum. It is easy to see that these WBG efforts to encourage investment funds to flow into poorest countries in the global South will benefit corporations. But is a “win-win situation,” as the WBG President claims, possible for both the poor and big business? Is it different from what he calls the “bad old days of privatisation”?

IBON International is concerned that the PPPs being promoted to encourage “development” foretell a losing outcome for the poor in the global South. PPPs are arrangements where governments subsidise big private firms to deliver previously state-delivered services or assets. Government surrender of its responsibilities to deliver social services, through PPPs, has notable social impacts not limited to: constraints in access to services (“cost-recovery” schemes that mean hikes in user fees, [3] such as in the case of privatised water supply in Manila); [4] and impacts on communities affected by construction of infrastructure.

In recent years, the WBG has been active in promoting PPPs. But cases of WBG-backed PPPs around the world shed light on the social costs. A water service PPP in the city of Nagpur in India was mired in delays in their replacement of old pipes; [5] limited daily supply of water for communities; [6] and corruption allegations. [7] The water service PPPs in India were considered “milestones” in making water services “stronger, more sustainable, and customer-responsive” by the World Bank. [8]

The private “partner,” an Indian subsidiary of French transnational corporation Veolia, on the other hand, has estimated 387 million euro revenue with the 25-year contract. [9] The International Finance Corporation (IFC), the private sector arm of the WBG, owned 13.9 percent of the Veolia subsidiary. [10] While the IFC denied involvement in the Nagpur project, it only divested from the Veolia subsidiary in July 2014 [11] -- three years after the PPP contract was signed.

In Latin America, 78 percent of all transport PPP contracts have been re-negotiated due to private firms’ addenda to contracts,

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