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'World Bank cash will lead to privatisation not progress'

Feb 04, 2009

The World Bank’s recent decision to lend a further $14 billion to India for development purposes sounded positive, but closer inspection reveals that it comes at a cost. Shripad Dharmadhikary argues that the deal will lead to more privatisation and bypass those who need the help the most.

On 11 December 2008, the World Bank announced its Country Assistance Strategy (CAS) for India for the years 2009-2012. The Bank envisages lending around US$14 billion over this period to India with US$4.4 billion coming from its concessional lending wing, the International Development Association (IDA).

The Strategy, according to a press release issued by the Bank on the same day, says that "The World Bank Group is tailoring its assistance to India both to fast-track much-needed infrastructure development and to support the country's seven poorest states achieve better living standards for their citizens."

Indeed, these are lofty aims that can hardly be faulted. However, a closer reading of the CAS that the Bank has made public shows that it is much the continuation of what the Bank has been pushing in India in the last 15 years or so - increasing commercialisation and privatisation of the economy. The CAS suggests privatisation as one of the key means to achieve goals of rapid and inclusive growth, making development sustainable and increasing the efficiency of service deliveries; however, experience has shown that these means are sure to defeat the aims.

Moreover, among the key roles envisaged for the Bank by the CAS is that of an expert, a knowledge provider and policy advisor. This means that a significant part of the Bank's efforts in India will go to influence our policies and push them towards globalisation, privatisation and commercialisation.

Privatisation

Privatisation of various sectors of the economy - or its new avatar, Public Private Partnerships (PPP) - is a recurrent theme in the CAS and is one of the key instruments envisaged by the Bank to meet its goals. For example, enhancing private sector participation is one of the key means envisaged by the CAS to ensure efficient deliveries of services. In the middle-income states, the International Finance Corporation (IFC), the Bank's arm that lends to the private sector is planned to be active.

However, the scope envisaged for privatisation is far more comprehensive than just this. The Bank says that: "The World Bank and IFC are collaborating to bring India cutting-edge expertise to deal with emerging issues in Public-Private Partnerships (PPPs), tailored to India's needs. While this work has so far been the strongest in infrastructure - power transmission, roads, irrigation and rural infrastructure, urban development - it will now be extended to agribusiness, health and education, and renewable energy."

The irony is that PPPs are faltering in infrastructure, the very area that the Bank claims PPPs have been the strongest. The Bank says that private investment in infrastructure in not expected to materialise to the extent hoped for, due to the global financial crisis and hence it will focus on strengthening the capacity of government agencies to design and manage public-private partnerships(PPPs).

However, private companies are growing hesitant to enter into PPPs, and this is only partly due to the global financial meltdown. At least in sectors like water where there is significant amount of social responsibility associated with service delivery, the private sector is reluctant to come in, as it is seen as being unprofitable. In spite of the poor record of privatisation to deliver services like water to the weaker sections of the society and its vulnerable members like small and marginal farmers, the Bank is wants to push the PPPs in more and more sensitive sectors.

Expertise and policy advice

The Bank is positioning itself as among the most knowledgeable experts, and the CAS shows its intention of using this position to push its policies. This is a continuation of the Bank's past CAS for the years 2005-2008 where being a knowledge provider was one of three key strategic principles underpinning its work in India.

The current CAS says that in PPPs, the Bank and IFC will bring "cutting edge expertise" to India. At the national level, the Bank "will continue to assist the central government by providing comprehensive analytical work to underpin policy and institutional reform" and for the middle income states, "Cutting-edge analytical work and the best international expertise will be brought to bear upon complex problems".

The CAS specifically notes that the Bank will support key studies in important policy issues. In the past, the Bank has carried out many of these studies itself.

These, and other examples show that the Bank is projecting itself as a most important repository of knowledge coming in to provide policy solutions to India.

Implications

The problem is that this knowledge provider by the Bank is seriously flawed. The Bank's expertise has no place for local knowledge, is developed by highly (over)paid consultants and is often designed to promote pre-determined policies. Further, this "expertise" of the Bank has repeatedly been seen to fail to deliver.

The privatisation-led approach has proven to be not only ineffective, but also disastrous, especially for the poorer and vulnerable sections of the society. There is massive evidence that privatisation has failed to take care of the basic needs of people. On the contrary, policies of liberalisation and unbridled privatisation similar to those propounded by the Bank created the conducive environment for the global financial meltdown.

In India, the last 15 years of these 'reforms' initiated by the World Bank and the IMF have had serious consequences for the poor and the environment. The CAS itself recognises this when it says:

"Recent World Bank analysis shows that the number of people who lived below a dollar a day in 2005 PPP dollars (a threshold which is close to the official poverty line) came down from 296 million in 1981 to 267 million in 2005. However, the number of poor people living under $1.25 a day in 2005 PPP dollars increased from 421 million in 1981 to 456 million in 2005.

This indicates that there are many millions of people living just above a dollar a day and their numbers are not falling. Inequality among households is also rising, primarily due to increasing income disparities within urban areas and between rural and urban India."

And here's another admission: "Most environmental indicators exhibit negative trends, suggesting that growth is having a negative impact upon the country's natural resources." Yet, the Bank is continuing the same policies that have led to these negative observations.

Thus, there is little hope that the money and advice promised by the Bank for the next three years will lead to betterment of prospects for those who need development the most. What it is likely to achieve is fat payments to consultants and private contractors, and public money being spent to commercialise more and more sectors of the economy.

It is little wonder that the a 12 member Jury of eminent people at the Independent People's Tribunal On the World Bank held in Delhi in September 2007 that heard over 60 depositions from 26 sectors, concluded, among other things, that:

"It is clear to us that a significant number of Indian government policies and projects financed and influenced by the World Bank have contributed directly and/or indirectly to this increased impoverishment and suffering.

All this has taken place while a minority of India's population that constitutes the middle class and rich has enjoyed the fruits of an economic boom ... The net effect of many Bank prescribed policy "reforms" appears to be the reorientation of the Indian State priorities from striving to secure a safety net for the poor and vulnerable to providing a safety net for large domestic and international corporations and investors."

It is not just the IPT that has found such issues with the Bank's program in India. Hundreds of other critiques of the Bank's work in general and its CASes in particular have been articulated by experts, civil society groups, movements and trade unions. However, the Bank has consistently ignored these.

The newly announced CAS is further evidence of this, and it seems that the Bank's record of promoting failure is unlikely to change.

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