IF-EYE Newsletter

Issue #19

Monday, July 02, 2007

A publication of the Bank Information Center

Welcome to the July 2, 2007 issue of the IF-EYE – the Bank Information Center’s bi-weekly synthesis of key developments concerning the international financial institutions.

Please send suggestions, contributions and subscription requests to: info@bicusa.org. Thanks for reading!

In this issue:

1. IFI Updates
2. Civil Society Highlights
3. SPOTLIGHT: Robert Zoellick selected as 11th World Bank President; what to watch
4. SPOTLIGHT: Tensions rise within the Inter-American Development Bank
5. New at BIC: BIC now has a webpage for its new MENA Program!

1. IFI Updates

IDA 15 Deputies prepare for upcoming Mozambique meeting

6/28-30/2007 World Bank

The second Deputies meeting of the World Bank’s 15th International Development Association replenishment process (IDA 15) will take place in Maputo, Mozambique June 28-30, 2007. The process will secure commitments from donors to provide resources for low-income countries supported through IDA, the Bank’s concessionary lending arm, to cover the period 2008-2011. Bank member country representatives participating in the process, known as IDA Deputies, identified fragile states, development effectiveness and the comparative advantages of IDA as key themes for discussion. African civil society leaders are also expected to attend the meeting.  Read more on BIC's IDA 15 webpage

Robert Zoellick confirmed as next World Bank President

6/25/2007 World Bank

The former US Trade Representative will replace Paul Wolfowitz, and begin his term on July 1, 2007. Read more

Tensions rise within the Inter-American Development Bank

6/22/2007 Inter-American Development Bank

The Bank’s Employee Association sent a letter to IDB President Luis Alberto Moreno on June 6 expressing "deep concern" about the IDB’s upcoming realignment. Read more

Selection committee narrowing candidate pool for World Bank accountability mechanism appointment

World Bank

The Bank committee identifying outgoing Inspection Panel Chairperson Edith Brown Weiss' replacement has reportedly narrowed the pool to four candidates. Civil society groups are calling for candidates with clear commitments to accountability and deep understanding of civil society and grassroots impacts of World Bank investments. Read more

IFC and China Exim to co-finance investments in Africa

6/18/2007 IFC

Many question the banks’ rhetoric of "support[ing] environmentally and socially sustainable investment" on the continent, citing dubious track records. Read more

Controversy surrounding Bujagali dam persists as Lake Victoria crisis continues

6/15/2007 World Bank

Just weeks after the World Bank Group approved $360 million in loans and guarantees for the controversial Bujagali Hydroelectric Dam, the project is again in the news following renewed debate over the crisis facing Lake Victoria. Read more

2. Civil Society Highlights

UK government urged to open IMF selection process after Rato

6/28/2007 Bretton Woods Project

UK NGOs – including Oxfam, ActionAid, Christian Aid, the new economics foundation and the Bretton Woods Project – have called on the new UK government and its European partners to end the 63-year-old "gentlemen’s agreement" that allows European governments to appoint the Managing Director of the International Monetary Fund and the United States government to appoint the President of the World Bank. Read more

Afrodad releases statement ahead of IDA 15 meeting in Mozambique

6/27/2007 Afrodad

The statement highlighted several key issues including debt, aid and conditionalities that the group believes require careful attention and consideration. Read more

US Social Forum wraps up in Atlanta, Georgia

6/27 - 7/1/2007 US Social Forum

"The US Social Forum was more than a conference, more than a networking bonanza, more than a reaction to war and repression. The USSF provided space to build relationships, learn from each other's experiences, share our analysis of the problems our communities face, and bring renewed insight and inspiration. It helped develop leadership and develop consciousness, vision, and strategy needed to realize another world. The USSF sent a message to other people’s movements around the world that there is an active movement in the US opposing US policies at home and abroad." Read more on the US Social Forum website

IFIs in Africa News Briefing #21

6/16/2007 BIC

Summaries and commentary on the latest news articles from between May 26 and June 15 on the international financial institutions (IFIs) in Africa. Sign up now to receive this publication in our new electronic newsletter format. Read more

3. Spotlight: Robert Zoellick selected as 11th World Bank President; what to watch

American Robert Zoellick was selected as the World Bank's 11th President by the Bank's Board of Directors on Monday June 25. The former US Trade Representative inherits a position marked by the recent scandal involving his predecessor, Paul Wolfowitz. Many are eagerly watching for signs of Zoellick's priorities in his new position. Some areas of particular concern:

• Africa. Will Zoellick cast the same attention on the continent as his predecessor? Yes, the President commented during a recent tour of Ghana, Ethiopia and South Africa. However, the real question is what impact will this focus have on the poor and the environment in Africa? What will be the consequences of a renewed emphasis on infrastructure, regional integration and financial sector reform, reported in the Financial Times to be areas which Zoellick may prioritize for the Bank's work in Africa? Since the international community declared 2005 the "Year of Africa" and then failed to deliver on commitments to increase aid, rhetoric about helping Africa abounds, with the Bank a lead voice in the chorus.  As Jeffrey Sachs recently commented in Fortune Magazine, "Just when the world has ramped up its verbal commitments to fight Africa's misery, the world's confidence in the bank is at a low ebb."  This growing mistrust coupled with a lack of action on the ground raises the stakes and the skepticism around new promises to put Africa at the top of the Bank's agenda. 
• Governance and corruption. The issues that marked Wolfowitz's presidency, and his downfall. Will Zoellick carry on the anti-corruption crusade begun by his predecessor? How will the implementation of the Bank's recent Governance and Anticorruption Strategy suffer as a result of recent events? And what, if any, lessons has the institution learned about problems with its own governance? Will Zoellick throw his weight behind governance reform, a longstanding concern of many monitoring the institution made only more real by recent events? Or will issues like reforming the presidential selection process be buried? Issues of member country voice and vote are already on the institution's docket for coming years, following the IMF's debatably weak lead.  
• Demonstrated commitment to poverty reduction. Yes, the Bank's official mission is to reduce poverty. But many claim that in practice the Bank acts much more like a Bank - prioritizing profits over the poor.   Incentive structures within the institution are aligned more with financial targets and lending levels than with poverty reduction and achievement of the Millenium Development Goals, on which the Bank claims its' work is focused.  Many have long called for better tracking and public reporting of project impacts throughout their implementation, as well as more robust, sustained ex-post evaluation of Bank projects. Local communities still struggle to access essential information. How will Zoellick support the upcoming Disclosure Policy review?
• Transparency. The Wolfowitz scandal highlighted longstanding concerns about transparency at the institution. Local communities still struggle to access essential information. How will Zoellick support the upcoming Disclosure Policy review?
• IDA 15. Can Zoellick successfully restore member government faith in the current International Development Association replenishment process (IDA 15)? The Bank needs to raise at least $24.5 billion to finance its activities in its poorest member countries during 2008-11. Many donors signaled reservations during the final months of Wolfowitz's tenure, due to concerns about the then-President's ability to successfully steer the institution.

Read more about Zoellick on BIC's What's next for the World Bank?, Transparency at the World Bank, IFI Governance and IDA 15 webpages. 

4. Spotlight: Tensions rise within the Inter-American Development Bank

by Vince McElhinny

Nearly twenty years ago, the Inter-American Development Bank (IDB) blazed trails, playing an historic and precedent-setting role in helping to resolve the environmental and social issues surrounding Brazilian highway BR-364. Soon thereafter, in the Eighth Capital Replenishment, the IDB’s Board of Governors mandated that the environment be one of the Bank’s four main operational priorities.  Since that time, however, while the IDB’s peer institutions (the World Bank Group, the Asian Development Bank, and the European Bank for Reconstruction and Development) have built more robust social and environmental organizations in an effort to better manage today’s economic, environmental, and social challenges, the IDB is widely recognized as the laggard in the field.  It only recently adopted substantive environmental and indigenous peoples policies; the revision of its infamous accountability mechanism has been stuck at the Board for two years; its staff resources, procedural requirements, and supervision have been inadequate; it has had no dedicated quality control/compliance function independent of project teams and little capacity for regional innovation and leadership.

Against this backdrop, the announcement of the IDB’s “realignment” was greeted with great optimism as an opportunity for a new operational structure and augmented internal capacity to reflect the Bank’s new policies and commitments to socially and environmentally sustainable development – particularly given the Bank’s increasing emphasis on large infrastructure projects with high socio-environmental risks as well as its recent high-profile failures to adequately manage them. 

Deep tensions have emerged among civil society organizations, the Bank’s Board and many on the IDB staff that the new organizational structure and implementation plan does not reflect the high expectations most held for the realignment:

• Environmental operations are lumped into a Division for Rural Development and Natural Disasters and distributed in part to Water and Sanitation Division.  By not being given their own Division, the IDB creates the perception that Energy and Transport will hold more authority over project decisions.
• Responsibility for compliance and for reporting on progress on social and environmental safeguards to upper management is entrusted to a Social and Environmental Risk Mitigation Unit Chief that reports directly to the Vice-President of Sectors and Knowledge (which is good) but will have to compete with various Infrastructure Division Chiefs. 
• Ultimate responsibility for compliance during project implementation is to lie within "Strategic Planning and Development Effectiveness", but there is nothing beyond Bank assurances to indicate that this office will have the technical capacity and authority to perform this function adequately. 
• The sum of these concerns leaves the lingering doubt that the proposed organization will lack a critical mass of environmental and social professionals who can carry the banner for environmental and social values, weigh in with upper management on a par with other interests, and exercise leadership within the institution (much less the region).

Some positive efforts have been taken by the Bank to improve upon the inadequate social and environmental operations and safeguards system that has until now constrained the IDB’s leadership in these field.  These include overhauling safeguard review process, keeping the safeguard unit involved throughout the entire project cycle, and encouraging greater country office participation prior to project approval.  However, calls are growing for the IDB to go much farther or risk damaging the credibility that the institution still enjoys in the region. 

The Bank's Employee Association sent a letter to IDB President Luis Alberto Moreno on June 6 expressing "deep concern" about the IDB's upcoming realignment and making public their differences with Moreno’s lack of transparency and irregular management (see below – also published in the Wall Street Journal, June 27, 2007).  A recent exposé in the Wall Street Journal by Bob Davis also touches on some of these tensions facing the IDB at this critical moment.

Read more about the IDB's realignment on BIC's 2007 IDB Realignment/Reestructuracion del BID and Inter-American Development Bank webpages.

5. New at BIC!

BIC now has a webpage for its new MENA Program!

6/19/2007 4:56:50 PM

Find out more about BIC’s brand-new Middle East & North Africa (MENA) Program. Read more