International financial institutions eye public services

by Gumisai Mutume

Washington, 6 Mar 2001 (IPS) -- Anti-privatisation protestors are expected to descend on the streets of Johannesburg this month as they demand a reversal of the sale of their municipal water supply to French multinational Suez Lyonnaise des Eaux.

Johannesburg residents will wake up to the new reality of private water flowing through their taps on Apr. 1 when Suez Lyonnaise officially takes over the municipal service. Suez Lyonnaise also runs water supplies in other cities such as Buenos Aires, Casablanca, Jakarta, Manila and Santiago in Chile.

The South African Municipal Workers Union (SAMWU), which forms part of a broader civic campaign against privatisation in the country, charges that when Suez Lyonnaise took over Casablanca’s water supply, prices rose three times during the first year of operation, and in Santiago, the company insisted on a 33% profit margin.

SAMWU is protesting the privatisation deal concluded last month because the new company “has not come up with any plan to extend running water to Johannesburg’s poor. All they have said is that they will improve services”.

The union is appalled that the ruling African National Congress, which came to power in 1994 with promises of providing free basic public services to those who cannot afford them, is inviting profit-driven multinationals to run these services. They see the hidden hand of the international financial institutions (IFIs) in the government’s about-turn from a left-leaning ideology to neo-liberal policies that push privatisation.

South Africa is not undergoing structural adjustment programmes unlike the majority of African nations to its north. But under its self-adopted Growth Employment and Redistribution Strategy - which upholds the major tenets of the Washington Consensus and which the World Bank had a hand in writing - it is liberalising its economy.

Its moves at privatising public services have the blessings of the other IFIs, such as the International Monetary Fund (IMF), which have been selling the line that the private sector brings efficiency and this will benefit the poor in the long run.

Civic movements have not bought that line and the battle brewing on the streets of Johannesburg may only be the beginning of a global struggle as the 140 members of the World Trade Organisation (WTO) negotiate the expansion of the General Agreement on Trade in Services (GATS), which was first adopted in 1994.

The agreement is contentious because it potentially targets all service areas - health, education and social security, sectors that affect the environment, transportation services, and postal and municipal services - opening them to free trade.

“These talks would radically restructure the role of government regarding public access to essential social services worldwide, to the detriment of the public interest and democracy itself,” warns an international network of civil society organisations campaigning against GATS.

The group includes the US-based Alliance for Democracy and the Institute for Agriculture and Trade Policy, the Norwegian Union of Municipal Employees, Thailand’s Focus on the Global South and the World Development Movement in Britain. They intend to protest the resumption of official GATS negotiations expected in April. The negotiations began in February 2000.

The world cast a big ‘no-vote’ to further liberalisation of global trade by blocking the Millennium Round of the WTO in Seattle in November 1999. The smoke and pepper spray that engulfed protestors in Seattle had barely lifted from the streets, when the WTO launched two sets of negotiations - GATS and a move to expand the Agreement on Agriculture.

The agreements could be concluded by next year and an expanded GATS could pave the way for many more Johannesburg’s around the world.

GATS will limit constraints to free trade especially those applied by governments. These could include labour laws, subsidies such as those used in public works and policies discriminating against foreign companies gaining access to local markets.

But why is there a rush to privatise the service industry? It is among the fastest growing sectors in the new global economy and transnational corporations realise how lucrative health, education and water provision can be.

The global health sector is estimated to be worth $3.5 trillion annually - about the size of the total value of exports from the 24 countries of the Organisation for Economic Co-operation and Development (OECD) in 1990. Global expenditure on education is estimated to be $2 trillion and water, $1 trillion.

Europe and the United States are so far differing on whether water should be included in GATS. Europe is eager to get more of its transnationals into service niches around the world, such as that carved out by Suez Lyonnaise in municipal water supply. Suez Lyonnaise serves 110 million people.

It remains to be seen which way US negotiators will go. They may have to balance out the interests of powerful environmental justice advocates who do not want water included in GATS and those of corporations who are pushing for limited coverage of GATS in areas where they are competitive with European corporations, notes Ruth Caplan of the Alliance for Democracy, one of the groups opposing GATS.

In an article in Canada’s Globe and Mail newspaper at the end of last month, WTO director-general Mike Moore described activists opposing GATS as “merchants of fear”.

“The WTO’s critics have always taken liberties with the truth,” he charged. “But the lies and distortions they are peddling about the WTO’s services agreement, known as GATS, are truly astounding.

“Freeing up trade in commercial services - everything from telecoms and tourism to finance and freight transport - offers huge benefits for every part of the world. Allowing foreign suppliers to compete with domestic ones lowers prices, improves quality and increases choice,” noted Moore.

In the past it has been the IMF and the World Bank pushing for the privatisation of services such as water, through conditions attached to structural adjustment loans driven by the Washington Consensus - a global economic model based on the principles of privatisation, free trade and deregulation.

In a recent random review of IMF loans issued last year to 40 countries, the non-governmental Globalization Challenge Initiative (GCI) found that in 12 countries - most of them African, very poor and debt-ridden - loan conditions required the privatisation of water, or policies ensuring full cost-recovery.

The countries were Angola, Benin, Guinea-Bissau, Honduras, Nicaragua, Niger, Panama, Rwanda, Sao Tome and Principe, Senegal, Tanzania and Yemen. In the study, Sarah Grusky of GCI noted that the significance of water privatisation conditions in IMF loans means it is those countries that are most dependent on the IMF, whose markets are at the mercy of the private corporations.