Select Committee on Treasury Memoranda


Memorandum submitted by Quaker Peace and Social Witness

  QPSW works in close co-operation with its American equivalent—American Friends Service Committee who have a regional programme in Central America working with grass roots civil society groups. In a recent fact finding visit to Managua related to the Nicaraguan Poverty Reduction Strategy Paper process we assessed the extent of civil society involvement in the PRSP process, the role of the international organisations, including the IMF, and the extent to which privatisation of utilities is likely to contribute to poverty reduction.

  The PRSP process is founded on the principle of local ownership rather than top down policy prescriptions from the IMF and the World Bank. We are concerned in general that:

    (a)  Civil Society contacts in Managua reported to us that there is very little capacity by those groups to deal with the PRSP process and related issues. Additionally they pointed out that the whole process to date had been urban based with virtually no rural engagement.

    (b)  There is a feeling that despite impressions to the contrary that civil society contributions to the consultations have made little or no impact on the final PRSP documents. This has contributed to a growing disillusionment and disengagement with the process.

    (c)  The resulting Nicaraguan PRSP documents that have emerged from the process are disappointing in their failure to address systemic problems like the lack of markets and the reliance on one or two commodities. Not much attention has been given to the need for growth in the small and medium sized businesses in Nicaragua, without which there is no chance of sustainable growth in the economy and resultant poverty reduction.

  In particular we are very concerned that ill-conceived privatisation plans are being imposed upon one of the poorest countries in the western hemisphere. Privatisation of the water system is causing tensions in Nicaragua, and, we submit, potentially endangering access to clean water.

  At the national level 54 per cent of the population is connected to a water system, 33.5 per cent of the population is without water services, and in rural areas over two thirds of the population are without access to clean water. It is clear that the State owned company ENACAL cannot afford to meet the demand. The IMF and World Bank say that the company is inefficient, therefore it cannot meet demand or expand services. The argument runs that a private company would have to operate efficiently to stay profitable.

  In the last few years the IMF has been pushing for full cost recovery from water services and privatisation in a number of countries. This is reflected in the figures: in 2000 the IMF made water privatisation and full cost recovery a condition in 12 of 40 stand-by debt and restructuring agreements.

  In 1999 the Inter-American Development Bank offered a loan to Nicaragua to assist with privatisation of parts of the water system. Part of the conditions for the loan is that the contract should be with an international company.

  Under pre-privatisation arrangements the water company is able to subsidise poorer communities through charges in more wealthy areas, it is unlikely that after privatisation such cross-subsidy arrangements would be allowed.

  Under the modernisation programme being promoted by the IADB connections would be made legal and reliable for 4,000 people in marginal settlements around Managua. (This would be around 5 per cent of the total number of people in marginal settlements near Managua). We are concerned that many families will not be able to pay for the water service once they are on meters. Indeed, we saw such a system in place on a marginal settlement near Managua which was full of people who had been re-settled following hurricane Mitch, and about 80 per cent of the people are unemployed in many of these communities.

  We encourage careful consideration on two main points:

    1.  Ensuring that the voices of the most vulnerable and marginalised in the HIPC countries are included in PRSP consultations, and that the economic plans are not simply another way of the IMF and World Bank imposing plans on developing countries;

    2.  Giving serious consideration to the concerns that are being raised about privatisation, especially of basic utilities like water.

14 May 2002

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 12 December 2002