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When City Water, a British consortium, won the contract to provide public water to Dar es Salaam, Tanzania, Africa, expectations ran high. But the private firm didn’t deliver on its promises and water prices went sky high when the company wasn’t realizing the expected profits.

The Tanzanian government cancelled the contract in May 2005 and the matter is now before a tribunal set up as part of a bilateral investment treaty that Tanzania signed with Britain in 1994, according to a report in The Guardian Weekly (Aug. 31-Sept. 6, 2007 edition).

 “The story of water in most cities in the developing world is that the poor pay most because they have to resort to vendors who peddle it around the streets,” the article said. “But in Dar es Salaam it is not only the poor. Decades of neglect and underinvestment in the infrastructure mean that fewer than 100,000 households – in a city of 3.5 million people – have running water.”

  City Water got the contract when the World Bank forced the Tanzanian government to privatize, touting it as a solution to supplying water. The bank and the International Monetary Fund “made the privatization of its assets a condition for Tanzania receiving massive debt relief,” the article said.

 “Few people had seen any benefits from privatization…prices had risen sharply, yet there was no discernible improvement in supply, reliability and quality,” the article added.

 “Privatization contracts are a business arrangement, and City Water’s was no different. Separate from the agreed capital spending, its one social obligation was to contribute towards a fund ‘to be used to connect new, mostly poor, households to the piped system’,” according to Maj Fiil, [from a Washington, D.C., water watchdog group]. The fund “was never created.”

 The Hague-based tribunal continues to discuss a complaint against Tanzania by Biwater plc, the lead company in the City Watch group. If it “upholds Biwater’s claim, the government’s payout will absorb the equivalent of two year’s of water payments by the people of Dar es Salaam,” the article said.