IF-EYE Newsletter
Issue #17
Wednesday, May 23, 2007
A publication of the Bank Information Center
Welcome to the May 22 issue of the IF-EYE – the Bank Information Center’s bi-weekly synthesis of key developments concerning the international financial institutions.
It has been a busy month, with the scandal surrounding ousted World Bank President Paul Wolfowitz dominating the headlines. The Wolfowitz scandal should serve as a sobering wake up call to the World Bank on the need for meaningful governance reforms. This issue of the IF-EYE consolidates some important suggestions on how the institution can move forward.
The Wolfowitz scandal certainly isn't all that's taken place over the past few weeks. The World Bank/IMF Spring Meetings furthered conversations on lending to Africa and climate change. And several other important regional lenders met as well, including the Asian Development Bank. This issue also highlights some of these other noteworthy developments.
Please send suggestions, contributions and subscription requests to: bic@bicusa.org. Thanks for reading!
In this issue
- IFI UPDATES
- CIVIL SOCIETY HIGHLIGHTS
- SPOTLIGHT: Hidden by Wolfowitz's shadow: other World Bank news from the past month
- SPOTLIGHT: Wake up call to the World Bank: it's time for meaningful governance reforms
- SPOTLIGHT: Report from Asian Development Bank Annual Meetings
- SPOTLIGHT: Bank of the South: A reflection of declining international financial institution relevance in Latin America
- ANNOUNCEMENTS AND RESOURCES
- NEW AT BIC: BIC launches search for new Executive Director
1. IFI Updates
2007 Annual Meeting of the European Bank for Reconstruction and Development
5/20-21/2007 | EBRD The EBRD Annual Meeting and Business Forum was held in Kazan, Russian. One hot topic of conversation was expected to be over the institution's profits, which many observers feel are the result of the Bank picking low-hanging fruit rather than promoting sustainable development and poverty alleviation. Read more
US Congress questions the role and effectiveness of the World Bank
5/22/2007 | US Government Hearing convened by the US House Committee on Financial Services, led by Chairman Barney Frank. Speakers included: Joseph E. Stiglitz, Robert Hunter Wade, David Beckmann and Stuart E. Eizenstat. Read testimonies online.
World Bank President Paul Wolfowitz resigns
5/17/2007 | World Bank Details of Wolfowitz's rise and fall on BIC's Wolfowitz Watch webpage.
African Development Bank Annual Meetings convene in Shanghai
5/16-17/2007 | AfDB China’s offer to host the event, which brings together senior finance and development officials from African and donor governments, speaks volumes about changing Sino-African relations. Read more
EBRD begins civil society engagement in review of its Environmental Policy
5/15/2007 | EBRD The European Bank for Reconstruction and Development (EBRD) plans to expand its Environmental Policy into an Environmental and Social Policy, which will be complemented by a set of Policy Requirements modeled after the Performance Standards of the International Finance Corporation. A discussion paper was released on May 11, and a new policy will be presented to the Board in December 2007. Read more
Experts selected for African Development Bank accountability mechanism
5/9/2007 | AfDB Madiodio Niasse, Maartje van Putten and Daniel Bradlow will serve as the Roster of Experts on the AfDB's new Independent Review Mechanism (IRM). The effectiveness of the IRM will soon be put to the test - a coalition of Ugandan NGOs has already registered a complaint over the controversial Bujagali hydroelectric dam. Read more
Inter-American Development Bank targets $3 billion in private sector biofuel projects
5/7/2007 | IDB IDB President Moreno announced planned investments in ethanol and biodiesel production, technical assistance for Central American countries, and a $300 million Green Energy Program. Read more
Venezuela withdraws from World Bank, IMF
5/3/2007 | World Bank, IMF President Hugo Chavez said that the Bank of the South will be Latin America’s newest source of lending and that it will be run by countries in the region. "Sooner or later, those institutions will fall due to their own weight," he and other leaders predicted. Read more
International Finance Corporation publishes General Environmental, Health and Safety (EHS) Guidelines and 55 Industry Sector Guidelines
4/30/2007 | IFC/World Bank Seven additional industry sector guidelines are still under final review and will be posted for public comment in May. Read more on the IFC website
World Bank gives green light to controversial Bujagali Dam in Uganda
4/27/2007 | World Bank World Bank approves $360 million financing package for dam on Victoria Nile despite concerns about climate change, environmental impacts and cost. Read more
World Bank Governance and Anticorruption Strategy Implementation Plan open for comment
World Bank The strategy was approved on March 20. Comments on implementation will be accepted through May 30. Submit comments on the World Bank website. Read more about the strategy on BIC's website.
2. Civil Society Highlights
Urgent Recommendation to World Bank and IMF Executive Directors on the Leadership Selection Reform at the World Bank and the International Monetary Fund
Currently signed by over 245 individuals. Read the petition online. Add your signature.
Ghanaian CSOs call for greater control over mining companies
5/14/2007 | Various NGOs Local groups argue that the controversial IFC-sponsored Ahafo gold mine seriously threatens the environment and livelihoods. Read more
NGOs worldwide demand World Bank overhaul
Letter signed by over 180 organizations worldwide demanding not only Wolfowitz’s resignation but fundamental reforms in the governance of the institution itself. Read the letter
Worldbankpresident.org sparks and sustains Wolfowitz debate
The site played an important role in the circulation of information about Wolfowitz and governance at the institution. Visit the site.
World Resources Institute establishes first business case for community consent
5/14/2007 | World Resources Institute Multinational corporations and financial institutions that seek local community consent for their operations will have a competitive advantage over those that fail to do so, concludes a report released by the World Resources Institute and endorsed by a $110 billion coalition of faith-based institutional investors. Read more
Chinese banks need to catch up on environmental policies
5/9/2007 | BankTrack/FoE US New report finds that only two of China's ten most important banks - China Development Bank (CDB) and the Export-Import Bank of China (Chexim) - have publicly-disclosed environmental policies. Both banks' policies fall short of international best practice, while the rest of the eight banks surveyed had no publicly-available environmental financing standards. Read the report on Banktrack’s website
BIC produces new primer for NGOs on the African Development Bank
5/8/2007 | BIC The Primer aims to help Africa’s civil society better understand what the AfDB is, how it may affect them, and what they can do to influence it. Read more
A Civil Society Response to the Report of the UN High Level Panel on System-Wide Coherence
April 2007 | The Center of Concern, International Trade Union Confederation, UBUNTU Forum Secretariat and World Federalist Movement The High Level Panel on System-Wide Coherence was appointed by then UN Secretary General Kofi Annan, with the aim of looking into ways to achieve stronger system-wide coherence across the various development-related agencies, funds and programs of the United Nations. Read more
ActionAid confronts IMF on impacts of its policies in Africa
4/30/2007 | ActionAidNew report documents the results of IMF macroeconomic policies on governments’ ability to hire teachers. Read the report
Multilateral debt: one step forward, how many back?
April 2007 | EurodadNew report scrutinizes the G8 debt deal 2 years-on. At the 2005 G8 Summit in Gleneagles, G8 leaders pledged to cancel US$ 40bn in debts owed by some of the world’s poorest and most heavily indebted nations. UK Prime Minister Tony Blair declared that the 2005 G8 Summit would become known as the “100% Summit”. Almost 2 years later, how far has this promise been kept? Eurodad has uncovered some surprising facts. Read more
3. Spotlight: Hidden by Wolfowitz's shadow: other World Bank news from the past month
The Paul Wolfowitz scandal has dominated headlines over the past month. Although the affair re-invigorates important conversations about World Bank governance and leadership, it has also overshadowed a number of other important developments, including:
Climate and Clean Energy: Climate and energy remained high on the Development Committee's agenda at April's World Bank/IMF Spring Meetings. For the most part, the Committee expressed support for the Bank's planned energy operations and re-emphasized the importance of increasing energy access and supporting climate adaptation measures, particularly in Africa. But for all the rhetoric about expanding rural electrification and combating global warming, research by BIC and Oil Change International indicates that the Bank is not putting its money where its mouth is. In fact, recent analysis by BIC shows that in FY06 the World Bank increased its financing for fossil fuel development by 93% and the IFC increased its investments in the private oil sector by 77%, rising faster than the Bank's investment in renewable energy sources and fueling concerns about climate contradictions in the Bank's portfolio. This continued support for oil and gas, coupled with recent enthusiasm around various carbon finance and emissions trading schemes, has prompted criticism that the Bank may be seeking ways to profit from, rather than to halt, the climate crisis.
Bujagali: The Bank also approved financing for the large Bujagali dam on the Victoria Nile that has been the subject of intense controversy for over 7 years. Critics remain concerned that the $800 million project is too costly to provide affordable energy to those who lack electricity today, that it will endanger biodiversity and the health of the world's largest tropical lake, Lake Victoria, and that it will further expose Uganda to the risks of dependence on hydropower in a warming world. Most strikingly, despite being one of the Bank's flagship energy investments in the region with financing from all arms of the World Bank Group, the Bujagali project fails to address the two issues that the Bank claims are the central concerns of its energy framework -- climate and energy access. Independent expert analysis indicates that the Bank has not factored in the likely future impacts of climate change on the hydrology of Lake Victoria or the Nile River, and the massive hydropower project contains no provisions for delivering energy to local communities or to the nearly 95% of Uganda's population without electricity today.
Governance and Anticorruption Strategy (GAC): The GAC was approved by the Board of Directors on March 20, and details on its implementation are being finalized (implementation plan is open for comment through May 30). The authors have identified seven emerging areas of intervention: country ownership and adaptation; indicators, research and development, monitoring; risk management and project design; private sector, civil society and other stakeholders; the global agenda, communications and consultation; budgeting and staffing; and leadership arrangements and change management. Many observers remain concerned about the mismatch between the Bank's rhetoric and reality in the GAC. Operationally, if not rhetorically, the strategy has conflated governance with the fight against corruption and been reduced operationally to a public sector reform agenda. This approach simply has not produced the desired results. It is not clear that it has appreciably diminished opportunities for corruption or state capture, much less promoted good governance. Nor has it had a clearly positive impact on aid effectiveness. The devil, as they say, will be in the details as implementation begins.
The Africa Action Plan (AAP): The Plan was one of the two main items on the Development Committee’s agenda at the Spring Meetings. The AAP Progress Report that the Bank presented to its governors was more a revised version of the Action Plan than a critical analysis of its impacts since taking effect in September 2005. Although the Progress Report notes some advances made such as in the health sector, and challenges faced in its agriculture program, it maintains its focus on promoting export-led growth in Africa.
Meanwhile, donors are not on track to deliver on their G-8 commitment to double aid to Africa by 2010. And the Bank is not on track to increase its lending to the region. At the end of the third quarter of fiscal year 2007, the Bank had approved only half of the “$5 billion or higher” total that Wolfowitz promised by the end of the fiscal year. This would leave nearly $3 billion worth of approvals in the final quarter the fiscal year, making for a very heavy "bunching season." If all these projects go to the Board before June 30th, civil society observers are worried that corners will be cut, particularly on due diligence and oversight of safeguard provisions, posing serious risks to affected communities and the environment.
Despite these problems, Senior Management's constant talk about Africa has proven strategic in this time of institutional crisis, helping to leverage/secure African leaders' support for embattled President Wolfowitz. Read more about African support for Paul Wolfowitz and the Africa Action Plan.
4. Spotlight: Wake up call to the World Bank: it's time for meaningful governance reforms
17 May 2007
The Wolfowitz scandal should serve as a sobering wake up call to the World Bank on the need for meaningful governance reforms. Its archaic 1940s convention of allowing the US to name the Bank’s leader undermines the institution’s legitimacy as well as the accountability of the Bank’s President.
The Bank does not need to look very far for reform proposals - including its own 2001 proposals for an open, competitive selection process that were summarily ignored. Supporters and critics alike have long called for governance reforms at both the World Bank and the IMF. Civil society groups have offered an extremely healthy set of well-founded recommendations over time. Even the Boards of the Bank and Fund tacitly admitted the flaws in their leadership selection processes by convening special committees in 2001 to devise procedures for open, competitive processes based on merit, not national origin. But the US and Europeans (the Europeans assert the right to name the head of the IMF) have jealously guarded their naming privileges, ignoring all calls for reform.
Some key recommendations, drawn from civil society and Bank/IMF sources:
1. The World Bank must adopt a transparent and accountable leadership selection process:
- Clear criteria and rules for identifying, nominating and selecting qualified candidates are critical. (2001 committee, IFI Democracy Coalition, Fleming, Center for Global Development, High-Level Panel on IMF Board Accountability). Explicit candidate qualifications, nomination procedures, timeframes, and decision-making responsibilities are crucial. Management experience and skill are especially important. (High-Level Panel on IMF Board Accountability)
- The Board - not one country - should oversee the selection process (Jenkins and Alexander) Executive Directors should be informed in a timely manner regarding candidates, including their credentials and knowledge of the institution. (2001 committee)
- The position should be open to candidates from any member country. (IFI Democracy Coalition, Jenkins and Alexander, High-Level Panel on IMF Board Accountability) As such, the US should relinquish its control over the World Bank and Europe its stronghold over the IMF leadership selection processes. (IFI Democracy Coalition, Jenkins and Alexander)
- An opportunity for candidates to share their views with the broader membership and external stakeholders is necessary (Fleming).
- An Advisory Group of eminent persons should assist in the selection process. This group would be composed of persons familiar with the goals of the institution drawn from, but not necessarily restricted to, academia, diplomacy/international affairs, and international development, banking or finance. The group would be supported by executive search expertise and consideration would be given to balance within the group. (2001 committee, IFI Democracy Coalition)
- There should be a channel for facilitating smooth communication during the process (2001 committee)
Read additional recommendations related to representation on the Board, accountability of leadership and the Board, transparency and participation on BIC's website. Links to sources also provided.
Read the latest on Paul Wolfowitz's resignation and governance debates at the World Bank on BIC's website and worldbankpresident.org.
5. Spotlight: Report from Asian Development Bank Annual Meetings
The Asian Development Bank (ADB) celebrated its 40th anniversary at its Annual Meetings in Kyoto, Japan in early May, signaling its close relationship with one of its largest shareholders (the other being the USA) and using the 10th anniversary of the Kyoto Protocol as an occasion to promote its new focus on climate change and clean energy.
Civil society groups made their presence felt through a Peoples Forum organized at the nearby Doshisha University, and through events organized at the official venue. Seminars, workshops, and press events held by Japanese and international groups debated the ADB’s track record in fueling climate change, upholding social and environmental standards and fulfilling policy commitments with regard to project affected persons, supporting the private sector, and upholding core labor standards.
People whose communities have borne direct negative impacts of ADB-funded projects were also present in Kyoto. They spoke at various public events and were center stage in the civil society meeting with the ADB President Kuroda. Now an annual feature, the meeting with the President allows civil society and affected persons to spotlight burning issues with the aim of getting public commitments from the President that hopefully improve things on the ground. But unfortunately, as on previous occasions, the President’s responses to issues put before him was not encouraging and many participants went away feeling such meetings were simply not a good use of time.
6. Spotlight: Bank of the South: A reflection of declining international financial institution relevance in Latin America
Recent announcements about the proposed opening of the Bank of the South's first Latin American office in Venezuela and the addition of three new member countries (bringing current membership to six nations: Argentina, Venezuela, Brazil, Bolivia, Paraguay and Ecuador) strengthen the institution's ability to challenge Northern-based international financial institutions struggling to remain relevant in Latin America. The advances of the Bank, closely aligned with discussions on regional energy policy and the larger project of building a Union of South American Nations, have also tested the South America rhetoric of integration.
The Bank was conceived in December 2007 at the Summit of the Comunidad Sudamericana de Naciones (CSN) by Venezuela's Hugo Chavez, Bolivia's Evo Morales and Argentina's Nestor Kirschner. The founders envisioned a new multilateral financial institution free from non-regional shareholder veto power over projects and policies. The Bank would provide an alternative to borrowing from the Inter-American Development Bank, the International Monetary Fund and the World Bank.
The organization’s ability to prove itself as distinct from the failed IFI policies and projects of the past will also depend on the Bank of the South's clearly articulating its definition of effective development in its lending framework. Implicit in this framework should be a system by which the Bank can be held publicly accountable to its stated principals and strategic objectives. Demonstrable evidence of impact rather than lending volume will ultimately distinguish the Bank of the South from its competitors.
7. Announcements and Resources
IFIwatchnet launches new look, features
The dynamic online network of organizations monitoring the international financial institutions has refined the look and usability of its website: www.ifiwatchnet.org. Check it out!
Check out the International Budget Project’s newsletter!
This handy resource keeps subscribers up to date on current trends in civil society budget work, innovative research, and public finance literature from around the world. This electronic newsletter publishes six issues per year in English, French, Russian, and Spanish and is distributed in 150 countries. The newsletter builds its content from news, interviews, case studies, and updates from organizations in Latin America and the Caribbean, North America and the Pacific, East and South Asia, Central Asia and the Middle East, Africa, and Europe. Read the latest issue. Subscribe to the newsletter.
BIC launches new webpages on the Andean Development Corporation (Corporación Andina de Fomento) and Bank of the South (Banco del Sur)
These new pages reflect the expanding focus of BIC’s Latin America Program. Read more
8. New at BIC
BIC launches search for new Executive Director
BIC is seeking a dynamic leader who can provide strategic direction for the organization and an international staff of about 25 professionals based in Washington, DC and overseas offices.
Check out BIC's Employment and Internships page to find out more.