It seems as though the outlook of the failure to achieve the Millennium Development Goals (MDGs) isn’t enough for the UN, who have produced equally ambitious and arguably unfeasible plans at the end of last week during the LDC consultation. The conference on Friday was the first to have a private sector track, and I’m not just surprised it’s here; I’m wholly disappointed.
In theory, privatisation is a good idea, providing that the two major rationales behind it are true. The first is based on the theory that private industry is managed more efficiently than state enterprises. The second assumes that private companies will invest in infrastructure, adding value to public assets through the injection of funding into public resources like health and education.
The problem, however, is that while there has been much optimism about the benefits of private enterprise, many studies have observed its failure to help with development while also consistently hindering the poor. Rather than being successful, these reforms have been argued by ActionAid to be ‘clumsy executed and highly controversial’. Even the World Bank’s evaluation of its own water projects in 2003 confirmed that the public sector had achieved the same level of efficiency as the private sector, with marginally higher achievement in the provision of new connections to the water network. What’s more, the region has seen that the privatisation of public companies can lead to: increased unemployment, lower wages, increased cost of goods and services (only affordable by the rich), and decreased access to poor populations who have a lack of legal access to a water supply.
Despite these past failures and reports, The UN’s programme for action argues that privatisation is the way forward in order to shake off the financial crisis, stating:
‘A dynamic, broadly based, well-functioning and socially responsible private sector is a valuable instrument for increasing investment and trade, employment and innovation, thereby generating economic growth and eradicating poverty and serving as an engine for industrialisation and structural transformation.’
With privatisation, the participation of a foreign investor is essential and enterprises are usually monopolistic. These private monopolies merely replace public monopolies, reaping sub-normal profits without necessarily delivering efficiency, and appropriating the revenues for private profit rather than for reinvestments.
A further issue with LDCs is that recommended tariff levels and structures have not been sensitive to the affordability of the poor, as Christian Aid discovered during studies of the DFID and World Bank policy requirements. Regardless of tariff levels, there is also often no obligation on private companies who win contracts to expand provision of utilities – as demonstrated in Ghana’s cities regarding the expansion the provision of safe water. Furthermore, water is the most controversial sector to privatise. As Graham noted from Christian Aid;
‘The dismantling of the water sector is the dismantling of state responsibility. Water is the petroleum of the 21st century.’
Despite the necessity of water for survival, the lowest coverage rates in the world are in LDCs, with only 57% of the population of Sub-Saharan Africa having access to safe water. On top of this, privatisation has clearly over-estimated the capacity of the private sector, with water still not reaching those who need it.
LDC delegates have been said to hold a pragmatic view towards the private sector. However, I beg to differ that this view is genuine: Their opinion is more likely to be down to the necessity of LDCs to adhere to conditions such as privatisation in order to receive aid. If they don’t, any aid they might have received could be reduced or even altered, by International Financial Institutions (IFIs) or donor countries like the UK. As such, we don’t see what LDC governments’ believe; we see what they are told to pretend to believe.
There’s a reason why the number of LDCs has decreased at an average rate of 1 per decade since the term was introduced, and the UN are staring it in the face. Not only is it visible, it’s practically dancing on the conference table; triumphantly urging them to promote the very thing that is keeping LDCs at the bottom.