The Observer | By Nick Mathiason | February 24, 2002
Investment in the infrastructure of developing countries has collapsed in the past seven years, threatening the lives of millions of people in the world's poorest countries, writes Nick Mathiason.
New figures from the World Bank show that loans from western banks and cash investments by private-sector firms for vital transport, water and power projects have dramatically dwindled.
The World Bank said last week that 'external financing' in infrastructure projects totalled Dollars 4.5 billion in the mid-Nineties. In 2000, that figure was down to Dollars 2.5bn. Speaking in Washington, Nemat Shafik, World Bank vice president for private sector development and infrastructure, said: 'Frankly, what we're seeing is a crisis whereby the public sector has withdrawn from financing infrastructure, thinking the private sector could carry the burden.'
The World Bank is seeking new ways of levering in private sector investment by offering contracts to building companies that offer in-built incentives for alleviating poverty. For instance, the more people companies connect to power grids, the bigger their payout.
The Bank says that 1.2 billion people lack access to safe drinking water, 2.4 billion suffer inadequate sanitation and 2.5 billion are without access to modern energy supplies.
World Bank officials argue that unless more is done to bring in private capital, international agreed targets for eradicating poverty will fail.
Its warning comes as President Bush prepares to attend a Financing for Development conference in Mexico next month.
Critics say the vital issues of world trade and access to markets have been forced off the agenda. Others say the World Bank is 'a one trick pony', too wedded to a privatisation model.
Barry Coates, director of the World Development Movement, said: 'The deeply ironic thing is if you privatise services, investment actually falls. What western investors want is quick returns for what it perceives to be big risk.
'There are some amazing stories of banks ripping off developing countries where contracts haven't been tightened.'
Developing countries could be further forced to open up their basic public services to overseas control under the General Agreement on Trade in Services treaty, which will be renegotiated later this year.The Observer:
