Big Water Companies Quit Poor Countries

Millions of people could have to wait years for clean water as some of the world's largest companies pull out of developing countries because of growing doubts about privatisation projects, a major UN report reveals today.

Political and consumer unease about multimillion-pound schemes that were intended to end the cycle of drought and death that has afflicted many countries is forcing major multinationals to think again. "Due to the political and high-risk operations, many multinational water companies are decreasing their activities in developing countries," says the UN's second world water development report, published today in Mexico City.

Political and consumer unease about multimillion-pound schemes that were intended to end the cycle of drought and death that has afflicted many countries is forcing major multinationals to think again. "Due to the political and high-risk operations, many multinational water companies are decreasing their activities in developing countries," says the UN's second world water development report, published today in Mexico City.

"In many settings, privatisation is a heavily politicised issue that is creating social and political discontent and sometimes outright violence."

Many companies have met intense political resistance in the past five years after winning large contracts to supply cities but then having to raise prices significantly. Some have been forced out of countries, others have left voluntarily.

The report cites Thames Water leaving Shanghai, Saur leaving Mozambique and Zimbabwe, and Suez downsizing in Latin America and Africa, as well as major demonstrations against European and American water companies in Bolivia, Malaysia, South Africa and Indonesia.

Many companies, it says, have not been able to make money and are now concentrating on less risky markets in Europe and North America.

Water privatisation was seen by the World Bank and G8 countries as the most effective way to bring clean water to large numbers of poor countries throughout the 1990s, but in spite of investments of $25bn (£14bn) between 1990 and 1997, the rich have mostly benefited at the expense of the poor. Sub-Saharan Africa has received less than 1% of all the money invested in water supplies by private companies in the last 10 years.

"Those who have benefited from private water services in developing countries are predominantly those living in relatively affluent urban pockets ... the very poor sections normally tend to be excluded," it says.

While some privatisations have been successful, many companies have faced accusations of profiteering or not meeting pledges to connect poor districts to the mains. British firms have been involved in controversial privatisations in Malaysia, South Africa, Tanzania and Indonesia.

Last week Suez, one of the world's largest water companies, said that it was now impossible for it to work in Latin America. In an interview with the Guardian, Jean-Louis Chaussade, the chief executive of Suez Environment, which has major contracts in Argentina, Bolivia and Haiti, said: "We are not a political organisation, but how can we do our job if the political system in countries changes its mind so often?

"Private funding runs into ideological problems. We need to be more humble. We have to adapt to local realities."

The UN report, which urges private firms to partner local authorities or governments, says the trend of privatisation is now reversing and that local and small-scale water companies are mushrooming. "Their potential to improve water supply remains unexplored ... There is a need to refocus privatisation. It is high time to bring the government back in," it says.

The report was broadly welcomed by development groups. "Water privatisation in developing countries has failed. Despite this, the UK government and the World Bank insist on supporting it at the expense of the world's poor. Governments and international institutions must ... invest public money in proven public solutions," said Peter Hardstaff of the World Development Movement in London.

In a separate report, the UK relief and development charity Tearfund claims that aid for water and sanitation from the EU and its members has been falling for five years, despite the fact that 6,000 children die every day as a result of poor water and sanitation. More aid money is going to middle-income rather than low-income countries, it says.