(IPS) analysis

A new World Bank drive to foster private firms in developing counties has come under fire from poverty reduction campaigners for failing to address the human and social concerns of marginalised masses, although bank officials insist their strategy is designed to improve living standards.

The bank's proposed private sector development (PSD) strategy, due to come before the institution's executive directors in December, is seen as a road map for future efforts to privatise basic services and infrastructure, among other things.

The Washington-based bank says the strategy sets out how developing nations, can "best tap and promote private initiative to pursue socially useful goals".

Officials say the strategy entails creating a "climate for growth", enhancing access to infrastructure and social services in health, education and water. The approach includes reducing existing subsidies and targeting them at the poor in a bid to improve the financial efficiency of services such as water, education, and health care.

But civil society campaigners, upset at the bank's previous poor performance on poverty issues, say the lender's rhetoric does not match realities on the ground.

"The new PSD will create an apartheid-like situation in poor countries," says Nancy Alexander, director of Globalisation Challenge Initiative (GCI), a Washington-based group. There is no evidence that private firms will accept lower profits to deliver services to the poor, she adds.

Alexander cites the example of a private water company that has threatened to withhold water, an obvious necessity for human life, from poor people in Armenia if they fail to pay their bills.

Regulatory weaknesses

GCI is among dozens of groups organising to change the PSD strategy. The groups argue that, given weak regulatory environments in poor countries, the Armenian case mostly likely would be repeated.

Michael Klein, director of private sector advisory services at the bank, counters that regulatory weaknesses force the poor to turn to private services in the first place.

"In many weak governance environments where public provision is ineffective in expanding coverage and providing reasonable service,'' he told IPS , ''the poor fall back on informal providers of infrastructural and social services, such as small-scale providers of electricity in Cambodia and small water companies, the 'aguateros', who supply piped water to urban households in Paraguay."

GCI and other campaigners, however, also fault the bank's strategy as "non-consultative".

"The question of how to provide services raises public resource allocation questions that should be debated openly among citizens," the groups say in a statement.

"We are dismayed at the content of the draft Private Sector Development Strategy and the process by which it was developed," they add. "If implemented, we believe that the Strategy has the potential to undermine the poverty reduction and sustainable development goals of the World Bank Group and negatively impact constituencies in borrowing countries."

Privatisation programmes

Bank officials maintain that discussions were held with representatives of the private sector, government and civil society groups in India, Pakistan, Indonesia, Cote d'Ivoire and Egypt, countries pursuing aggressive privatisation programmes.

Klein, who notes critics' assertion that private firms generally neglect service delivery to unprofitable populations, says that for the first time, the new strategy would tie payments to services actually delivered to the poor.

"Payment of subsidies is dependent on service providers being able to show - for example that x percent of people have been immunised, or target numbers of children have successfully completed primary education, or x percent of the poor have connections to drinkable water," he says.

"The question is why services to the poor may not be profitable," he adds. "Services are not profitable because the poor are unable to pay full cost. Here, well-targeted provision of subsidies to the poor can help address the affordability issue and make service provision to the poor a profitable proposition."

Tension between civil society groups and the bank over such issues is not new. The groups say they want to change the lender's approach so it is more pro-poor. But in a signal that coming fights will prove just as heated as past battles, the institution in a recent statement assailed its critics as "promoting continued conflict, diatribe instead of dialogue, and efforts to block policymakers from discussing how to address these serious issues".

This, the bank insists, "only hurts the poor".