The British government has been imposing privatisation on developing countries, often with disastrous results, as a condition for granting aid, according to a report to be published this week.
The study, undertaken by War on Want and to be launched at the Labour party conference, says private sector consultants are earning ”immense sums” from the arrangement and the Department for International Development (DfID) has ”invested heavily in the privatisation programme…to advance the cause of privatisation across the developing world”.
The organisation says the privatisation of many services in developing countries has led to increased poverty, and calls for an independent commission to investigate the scale of privatisation in poor countries and its effects.
”There is a solid body of evidence which shows that privatisation of public services increases poverty in developing countries,” said John Hilary, director of campaigns and policy at War on Want and the author of the report, Profiting from Poverty.
”DfID’s mission is supposedly to eradicate poverty, yet it has taken the lead in promoting privatisation of public services worldwide.”
The report suggests that many developing country governments are required to engage the consultants as a condition of qualifying for loans or debt relief from international financial institutions. It claims that ”DfID has dedicated itself to the privatisation of public services in developing countries [and] has also spent considerable sums from the UK’s aid budget paying for privatisation consultants to advise developing countries on public service reform”.
In the first five years of the Labour government, the then five major accountancy firms agreed new contracts worth £118-million in consultancy fees alone. Another major beneficiary has been the consultancy arm of the Adam Smith Institute which has received $34-million from the UK aid budget in the past six years.
Those involved in privatisation contracts include the consulting arms of accountancy firms PricewaterhouseCoopers, KPMG, Deloitte Touche Tohmatsu and Ernst & Young. Arthur Andersen was also engaged in many schemes before its fall from grace in the 2001 Enron scandal.
There is no suggestion the companies acted improperly. Instead, the War on Want report criticises the DfID’s policy of employing them and singles out developing countries where privatisation has been introduced in this way.
It claims that:
In South Africa, KwaZulu-Natal department of health entered into a 15-year public private partnership for the Inkosi Albert Luthuli hospital in a deal worth $75-million in 2001.
In Kyrgyzstan, Arthur Andersen acted as advisers and the electricity prices were increased to make the state company more attractive to potential foreign buyers. This led to more than half of the residents of the capital, Bishkek, being unable to pay their bills.
In China, PricewaterhouseCoopers led a consortium of advisers to the Chengdu city government on its water supply service, the contract for which was eventually awarded to the French water giant Vivendi, and the Japanese Marubeni Corporation for $106,5-million. PricewaterhouseCoopers then acted as adviser to Vivendi and Marubeni in their bid for a water treatment plant in Beijing.
In Malaysia, PricewaterhouseCoopers advised the government on privatisation of the sewerage system, completed in 1993. After complaints over rising charges and falling services, the government took the system back into public ownership in 2001
”There is now a substantial body of evidence to show that privatisation of public services threatens to expose millions of people in developing countries to increased poverty,” concludes the report.
”Yet the UK government has positioned itself as an international champion of privatisation and DfID channels large sums of the UK aid budget to privatisation consultants.”
According to the report, the World Bank is also pressing heavily for a privatisation programme despite the findings of its own internal assessments that it is an area in which ”operations have not paid sufficient attention to the potentially adverse social impact of reforms”.
War on Want has called for an investigation into the system and for the suspension of privatisation-related contracts until a commission of inquiry has reported. They will press this case with Hilary Benn, the international development secretary, in Brighton this week.
A DfID spokesperson said: ”We will study War on Want’s report and respond shortly.” – Guardian Unlimited Â