World Bank, WTO,
and corporate control over water

by Vandana Shiva

International Socialist Review, Aug/Sep 2001


Giant water projects have always benefited the powerful and dispossessed the weak. Even when built by government and paid for by public money, the beneficiaries have been construction companies, industry, and large commercial farming interests. Donald Worster has called this the "contrived market of the state"-the capitalist state working to facilitate the unlimited accumulation of private wealth.

While privatization and globalization have been accompanied by the rhetoric of the disappearing role of the state, what we see instead is the state increasingly intervening through policies, rules, laws, investment, and technology in shifting control over water from communities and the public to commercial, corporate interest.

The policies of privatization imposed through the World Bank and rules of trade liberalization being negotiated in the World Trade Organization (WTO) under the General Agreement on Trade in Services (GATS) are rules and conditionalities that create corporate states-states that usurp resources from people for meeting vital needs and put them in the hands of private corporations for making profits through the privatization of essential services.

The World Bank An instrument for corporate control over water

Having created scarcity and pollution through the promotion of nonsustainable water use, the World Bank is now transforming the scarcity it has created into a market opportunity for water corporations. The World Bank estimates the potential water market at $800 billion.

Monsanto, the biotech giant, has also been planning entry into the water business. Monsanto is seeing a new business opportunity in water because of the emerging water crisis and the funding available to make this vital resource available to people. As a Monsanto strategy paper states:

First, we believe that dlsconunuities (either major policy changes or major trendline breaks in resource quality or quantity) are likely, particularly in the area of water and we will be well-positioned via these businesses to profit even more significantly when these discontinuities occur. Second, we are exploring the potential of non-conventional financing (NGOs, World Bank, USDA, etc.) that may lower our investment or provide local country business-building resources.

The trend of the World Bank using its financial conditionalities to privatize water and establish trade in water suits Monsanto well. The World Bank has already offered to help. As the Monsanto strategy paper states:

We are particularly enthusiastic about the potential of partnering with the International Finance Corporation (IFC) of the World Bank to joint venture projects in developing markets. The IFC is eager to work with Monsanto to commercialize sustainability opportunities and would bring both investment capital and on-the-ground capabilities to our efforts.

Thus, the crisis of pollution and depletion of water resources is viewed by Monsanto as a business opportunity. For Monsanto, "sustainable development" means the conversion of an ecological crisis into a market of scarce resources.

The business logic of sustainable development is that population growth and economic development will apply increasing pressure on natural resource markets. Monsanto plans to earn revenues of $420 million and net income of $63 million by 2008 from its water business in India and Mexico. By the year 2010, it is projected that about 2.5 billion people in the world will lack access to safe drinking water. At least 30 percent of the population in China, India, Mexico, and the U.S. are expected to face severe water stress. By the year 2025, the supply of water in India will be 700 cubic Km per year, while the demand is expected to rise to 1,050 units. Control over this scarce resource will of course be a source of guaranteed profits.

The logic of privatization

The water privatization policy of the World Bank was articulated in a 1992 paper entitled "Improving Water Resources Management." The Bank believes that water availability at low or no cost is uneconomic and inefficient. Even the poor should pay. As the World Bank states,

When water services are reliable, the poor are willing to pay for them, and...when service is not reliable, the poor pay more for less, typically from street vendors. As pointed out in the "World Development Report 1992," the poor need to be provided with a wider range of options so they can choose the level of water services for which they are willing to pay, thereby giving suppliers a financial stake in meeting the needs of the poor. Fee schedules can be structured so that consumers receive a limited amount of water at a low cost and pay a higher fee for additional water.

This is the logic of reducing universal fundamental rights-such as the right to water-to commerce and markets, and then "targeting" the poor to provide access to water in a system that essentially excludes the poor. The same logic has been applied to dismantling of food rights in India. However, while reduction of government expenditure was the main justification for removing food subsidies and transforming the public distribution system (PDS) to a targeted public distribution system (TPDS), the government expenditure increased, food prices increased, and the consumption of the poor declined. While thousands of people were dying of starvation, million tons of food grain was rotting in the godowns.

Just as the economic reform policies guided by the World Bank logic of privatization of food distribution create hunger, the privatization of water services will create thirst and water scarcity.

The World Bank has recently initiated water sector reforms, aimed primarily at privatization of water resources and commercialization of water management. The privatization policy recommends commercializing operations at all levels, private investment, substantial increase in water prices, increase in agricultural power tariffs, and creation of water markets.

These are recipes for conversion of water into a tradeable commodity rather than a life support base. Privatization will aggravate the water crisis, because given the inequalities between rich and poor, industry and agriculture, urban and rural, water markets will take the water from the poor to the rich, from impoverished rural areas to affluent urban enclaves. It will also lead to overexploitation of water, because when access to water is determined by the market and not by limits of renewability, the water cycle will be systematically violated and the water crisis will deepen. Local community management is a precondition for both consumption and equitable use.

Ignoring limits of water availability and the conservation imperative, the Bank recommends a shift from a "supply-oriented" to a "demand-oriented" approach. Demands of the economically powerful will therefore override the needs of the poor and the limits of nature. Partial application of this logic through World Bank lending is not the root of the present crisis. Full implementation of the logic of privatization will not reverse the crisis; it will aggravate it.


The water giants

Water has become big business for global corporations that see limitless markets in the growing scarcity and growing demand for water.

The two major water market corporations are eyeing all the privatization of public services for drinking water supplies and the bottled-water market. The two biggest players in the water industry are Vivendi Environment and Suez-Lyonnaise des Eaux. Both are based in Paris but are spreading their empires worldwide. The French water giants have water interests in 120 countries.

Vivendi Environment, the "environmental services" arm of Vivendi Universal, is involved in water, waste management, energy, and transportation businesses. Vivendi Universal is a global media and communications company involved in TV, film, publishing, music, Internet, telecom, and, of course, water. On June 20, 2000, it merged with Seagram Co. Ltd. and Canal Plas SA. On January 27, 2000, Vivendi was awarded a contract valued at 43 million euros for the wastewater treatment plant of the city of Berne.

Vivendi also has a 50-50 joint venture company with SAUR called CTSE in the Czech Republic. Total net sales are expected to be 200 million euros. Vivendi's subsidiary Onyx bought Waste Management Inc. hazardous waste operations in Mexico for $47 million. Vivendi has also bought waste services in Hong Kong and Brazil from Waste Management for $136 million.

Thames Water, Biwater, and United Utilities are United Kingdom (UK) water companies active in Asia, South Africa, and the Americas. Thames, however, was bought up for more than $6 billion by RWE, a large diversified electric utility that has moved into water. Biwater was established in 1968. The name "Biwater" (or "two waters") was aimed to reflect the company's involvement in both dirty and clean water.

In the 1970s, Biwater entered water contracts in Indonesia, Hong Kong, Iraq, Kenya, and Melawi. In 1986, Biwater got the contract for Malaysia's rural water supply. And in 1989, it entered water markets in the UK during the privatization of water services. In the 1940s, it entered Mexico and the Philippines. In 1992, it acquired the German company IBO GmbH. In 1993, it acquired Megadex of Poland. In 2000, it launched a joint venture company named Cascal with NV Nuon ENW of Holland. Through Cascal, it has concessions in the UK, Chile, the Philippines, Kazakhstan, Mexico, and South Africa.

The Spanish Company Aquas de Barcelona is active in Latin America. General Electric is also working with the World Bank to create an investment fund to privatize power and water worldwide. Enron, the energy company, has also started to bid for water contracts in Bulgaria, Rio de Janeiro, Berlin, and Panama. Enron's water company is Azurix, which estimates that $600 billion will be spent on worldwide water and waste water infrastructure over the next decade, and the "water industry" will have total annual revenues of approximately $400 billion. However, Azurix has not been able to compete with Vivendi and Suez-Lyonnaise. Enron is buying back the company, preparatory to dismantling it.

The privatization of water services is the first step in privatization of water. The U.S. water market, estimated at $90 billion, is the largest in the world. Vivendi is investing heavily to control it. In March 1999, it purchased U.S. Filter Corporation for more than $6 billion and formed the largest water corporation in North America, with projected revenues of $12 billion.

Privatization of water services leads to increases in water prices. In France, customer fees increased by 150 percent as a result of privatization, but water quality deteriorated. A French government report revealed that more than 5.2 million citizens received "bacterially unacceptable" water. In England, water rates increased by 450 percent, profits of water companies increased by 692 percent, and salaries of CEOs increased 708 percent. Meanwhile, the number of customers who have been disconnected from water services as a result of the price hikes has increased by 50 percent. Dysentery increased six-fold, and the British Medical Association had to condemn water privatization because of its health impacts.

In Argentina, the state-run water company, Obras Samitarias de la Naceon, was sold to Aguas Argentinas, a subsidiary of Suez-Lyonnaise des Eaux. The IFC, an arm of the World Bank, provided a $172.5 million loan to Aguas Argentinas in 1994. A subsidiary of the French company got a 30-year rural water contract. It doubled the rates, but failed to provide dean water. The company was forced to pull out because people refused to pay their bills.

The great thirst

In the maquiladora zone of Mexico, drinking water is so scarce that babies and children drink Coca-Cola and Pepsi. Water scarcity is clearly a source of corporate profits. Coca-Cola's products sell in 195 counties, generating revenues of $ 16 billion. As an annual report of Coca-Cola says:

All of us in the Coca-Cola family wake up each morning knowing that every single one of the world's 5.6 billion people will get thirsty that day. If we make it impossible for these 5.6 billion people to escape Coca-Cola, then we assure our future success for many years to come. Doing anything else is not an option.

Companies like Coke are fully aware, however, that water is the real thirst quencher, and, with other corporations, they are jumping into the bottled-water business. Coca-Cola has its international label, Bon Aqua (the American version is called "Dasani"), and Pepsi has its Aquafina line. Coke predicts that its water line will surpass its soft drink line. In India, Coke's water line is Kinley. When Coke used a doctor to advertise its bottled water, the government was forced to take action. It decided to classify bottled water as "food" under the aegis of the Prevention of Food Adulteration Act. An earlier government notification does not allow medical professionals to endorse food production. Coke was forced to discontinue its ad campaign promoting Kinley.

Besides Coke and Pepsi, there are well-known brands such as Perrier, Evian, Naya, Poland Spring, Clearly Canadian, Purely Alaskan. There are thousands of smaller bottlers. In March 1999, the Natural Resource Defense Council studied 103 brands of bottled water to find that bottled water is no safer than tap water. One-third of the brands contained arsenic and E. coli; one-fourth contained merely bottle tap water. In India, a study on bottled water published in the January/February 1998 issue of the Ahmedabad-based Consumer Education and Research Centre magazine Insight said that of the 13 known brands, only three conformed to all the specifications. None of the brands were free of bacteria, though some brands claimed to be "germ free" and 100 percent bacteria free.

Water wars in Bolivia: Corporations vs. citizens

In the semi-desert region of Cochabamba, Bolivia, water is scarce and precious. In 1999, the World Bank recommended privatization of Cochabamba's municipal water supply company, SEMAPA, through a concession to a private consortium, Aguas del Tunari, which involved International Water, a subsidiary of Bechtel. A law was passed called the Drinking Water and Sanitation Law in October 1999 that withdrew subsidies from basic services and allowed privatization.

The private water company doubled water rates. In a city where minimum wage is less than $100 a month, water costs increased to $20 a month, nearly the cost of feeding a family of five for half a month. The water price-hike, which was the source of Bechtel's profits, was thus based on depriving already poor children of food, clothing, education, and health care.

In January 2000, a citizen alliance, "La Coordinara," was formed. The alliance shut down the city for four days. The government promised to reverse the price hike, but never did. La Coordinara organized a peaceful march in February, in a "symbolic taking of the city of Cochabamba" to demand the following: repeal of the Drinking Water and Sanitation Law, annulment of ordinances that allowed the privatization, annulment of the contract, participation of citizens in drafting a Water Resource Law. The protests were repressed violently.

The citizens' protests were directly against the logic of privatization of water. La Coordinara's fundamental critique of the concession was based on the negation of the community's property rights to water resources, traditional rights ("usos y costumbres"), and the rights and obligations of water corporations, committees, and associations.

The Cochabamba citizens' movement slogans were "Water is God's gift and not merchandise" and "Water is life." By reclaiming water from corporations and the market, the citizens of Bolivia have shown that privatization is not inevitable and that people and their democratic will can prevent corporate takeover of our vital water resources.



Vandana Shiva is the director of the Research Foundation on Science, Technology, and Ecology, and the author of several books, including Stolen Harvest: The Hijacking of the Global Food Supply (South End Press). In 1993, Shiva won the 'Alternative Nobel Prize " (the Right Livelihood Award). Before becoming an activist, Shiva was one of India's leading physicists.

Water page

Vandana Shiva page

Index of Website

Home Page