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IF-EYE

26 January 2006

Read the first issue of BIC's new monthly newsletter: the IF-EYE!

Introducing the IF-Eye!

Welcome to the first issue of the Bank Information Center's new publication: the IF-EYE. The IF-EYE will provide timely updates on key developments and debates occuring at the international financial institutions (IFIs) and within civil society. A monthly publication of the Bank Information Center, the IF-EYE will also disseminate information on relevant meetings, events and publications.

We are still finalizing the content, tone and format of this publication. Feedback and suggestions are appreciated!

Please send comments to Karen Showalter at BIC: kshowalter@bicusa.org

In this issue

  1. What’s new at the IFIs
  2. Wolfowitz Watch
  3. Word on the Street
  4. Issue spotlight: World Bank suspends $124 million in assistance to Chad
  5. Partner spotlight: Bankwatch
  6. Ask BIC
  7. Meeting Picks
  8. Must-reads
  9. Announcements
  10. What’s new at BIC

What's new at the IFIs

Wolfowitz Watch

It’s been a busy month for those monitoring the presidency of Paul Wolfowitz. The president has strengthened his circle of close supporters in key advisory positions, fueling tensions with World Bank staff.

The Financial Times and Washington Post, among others, have recently written on Wolfowitz’s management style, new appointees and relationship with bank staff.

Many of the recent articles highlight bank staff concerns about recent presidential staff appointments, including concerns about the process for appointing these figures and their wide-reaching influence.

Considerable attention has also been cast on the recent appointment of Suzanne Rich Folsom as director of the Department of Institutional Integrity. "Her appointment has raised objections that a person close to Mr. Wolfowitz, and with a political background, has been put into a senior position at a unit that was seen as independent of the president's office since it was set up in 2001," Andrew Balls and Edward Alden noted in the Financial Times on January 23.

In addition to appointments, Balls and Alden discussed staff concerns over the president’s management style, claiming that bank staff are dismayed by Wolfowitz's delays in pulling together his management team and the growing rift between his closest advisors and bank staff, fueled by both his advisors’ general suspicion of staff and staff fears of the president’s interest in pushing the Bush administration agenda on the institution. The growing rift between bank staff and Wolfowitz’s team is apparent (see January 23, 2006 (World Bank) Staff Association Message to All Staff in next section)

In the January 20 Washington Note, Steve Clemons cited a staffer claiming that "Wolfowitz just does not talk to his Vice Presidents. He speaks to a few close advisors - Kevin Kellems, Robin Cleveland, Karl Jackson, some others - but a lot of very good people are leaving."

Finally, Balls and Alden underscore the new president's focus on battling corruption. While many within the institution and NGO community applaud this move in general, there are concerns about potentially unorthodox measures Wolfowitz and his supporters may be taking to implement this priority. In particular, Alden and Balls discuss charges that Folsom has violated internal bank procedures and broken into staff email accounts to investigate corruption charges. Wolfowitz's office has denied those claims.

Appointments raising eyebrows include

  • Robin Cleveland, Counsellor to the President. Former Associate Director of the Office of Management and Budget (OMB) in the Executive Office of the President of the United States. Supervising a portfolio of more than $500 million a year, Cleveland helped develop the United States' response to the tsunami disaster, the President's Emergency Plan for AIDS Relief (PEPfAR) and the Millenium Challenge Corporation.
  • Kevin Kellems, Special Advisor to the President and Director of Strategy of External Affairs. Former Communications Director and Spokesman for Vice President Dick Cheney, Kellems has advised both Paul Wolfowitz and Senator Richard Lugar, Chairman of the Senate Foreign Relations Committee.
  • Suzanne Rich Folsom, Director, Department of Institutional Integrity. Folsom is charged with investigating allegations of fraud and corruption associated with World Bank projects.
  • Robert Pozen, Special Consultant. Pozen has served as a visiting lecturer at Harvard’s Kennedy School of Government, the Vice-Chairman of Fidelity Investments, and the President of Fidelity Management & Research. The exact responsibilities of his assignment were not made public.

Notable departures have included

  • Shengman Zhang, Managing Director. Although Graeme Wheeler was appointed Acting Managing Director, Alden and Balls contend that a good part of the position's responsibilities have actually been transferred to Robin Cleveland.
  • Roberto Danino, General Counsel. Former Prime Minister of Peru (2001-2002) and the Peruvian Ambassador to the United States (2002-2003). Rumored to have told staff that he was tired of working in an institution where he’s not being consulted on major decisions.
  • Ian Johnson, Vice President for Environmentally and Socially Sustainable Development.

Read the articles

Word on the Street

In addition to rising tensions between Wolfowitz and staff over recent senior-level appointments, our people on the street are hearing allegations that Wolfowitz is only promoting staffers from developed countries. We’re also hearing concerns about his failure to confirm appointees, leaving them in the impermanent realm of “acting” in positions. BIC obtained the following memo from the World Bank Staff Association to World Bank staff which lends some interesting color to the discussion.

January 23, 2006 Staff Association Message to All (World Bank) Staff

Dear Colleagues,

The Staff Association has heard from staff across the institution--representing all grade levels--expressing concerns over recent staff announcements. The overwhelming sentiment expressed has been one of dismay at the perceived lack of consultations by the Office of the President. Staff were particularly offended by senior management’s dismissive depiction of staff concerns in the press, ascribing them to a “handful of disgruntled staff," and to "an effort to undermine efforts to go after corruption on bank projects." Staff of this institution are highly responsible and professional; we uphold Bank guidelines against corruption on a daily basis. These comments only underscore the increasing disconnect between EXC and staff at large.

Reflecting these views, and in an effort to address future appointments differently, the Executive Committee (EC) of the Staff Association raised these concerns in a meeting with Mr. Wolfowitz last Thursday. The EC stressed the need for strengthened communication and engagement of staff, citing the sensitivities concerning the lack of reliable information and lack of diversity, giving rise to speculation around the transparency and viability of the selection process. In order to be effective as an institution, we must exemplify the recommendations we make to others. This is particularly important at the highest levels of the institution.

Recent appointments--and specifically those of the Director of Institutional Integrity and Director of Strategy, EXT--have drawn extensive comments from a significant number of staff. While we fully understand the president’s perogative to create positions and appoint those senior managers he wishes, it is the SA's strong view that certain positions do not lend themselves to this type of recruitment and we would hope that such critical positions be filled in a transparent manner, through competitive selection and against clear terms of reference. We are an insitution that short-lists for much more junior positions: it is vital that we go through the same due process for those of such critical importance if we are to have credibility in the work we do outside the institution. In our view, it sends the wrong message for positions such as these to wear the dual hats of Director and Counselor in the President’s Office: a practice for which there is no precedent and which has raised questions about independence and objectivity. The Staff Association does not dispute the qualifications of the managers appointed to these positions - we are concerned, however, that the positions were not filled in accordance with established recruitment procedures, which exemplify our commitment to good governance. The SA encourages the President to take the necessary action to ensure that information surrounding these appointments is made available and that future senior positions are filled in a manner that lends credibility to our institutional practices.

Bank Group staff, as Mr. Wolfowitz has stated on numerous occasions, are highly committed to their institution, and the overwhelming majority believe in and uphold its values. As a team, however, we must all match rhetoric with action and in that regard, we hold our Senior Management to these same standards.

Alison Cave,
Chair, Staff Association

Issue spotlight: Wolfowitz suspends World Bank disbursements and future lending to Chad

The World Bank's highest profile extractive industry project, the Chad-Cameroon Oil Pipeline, appears to be falling apart. On Friday January 6 World Bank President Paul Wolfowitz announced that the Bank will suspend disbursement of approximately $124 million in loans to Chad and withold new loans and grants. The move is in response to the government of Chad's December decision to revise the Petroleum Revenue Management Law 001, the centerpiece of the Bank's experiment in converting petrodollars to poverty reduction. Specific changes included:

  • Increasing from 15% to 30% the amount of direct petroleum revenues deposited into general government coffers, bypassing the joint government-civil society revenue oversight committee (the Collège)
  • Eliminating the Future Generations Fund (FGF) (a fund that set money aside for the post-oil era) and using the money accumulated for immediate expenditures
  • Redefining “priority sector” expenditures to include spending on security

The move follows failed attempts to resolve concerns through dialogue. "We've been trying for some time to open dialogue with the government of Chad ...instead of engaging in dialogue, they have proceeded unilaterally," Wolfowitz told Reuters. "We haven't given up on dialogue and hope in fact that perhaps if they stop and appreciate how serious the issue is from our point of view and not only from theirs, we can find some common ground.''

The risks of "high risk" investment

As human rights groups and civil society organizations warned before the project was approved in 2000, investing in oil in an unstable country with a history of human rights abuses and no effective democratic institutions is a dangerous undertaking. The risks associated with this "high-risk, high-reward" investment have become all too clear in the past weeks.

As the security situation in the country worsens, President Deby has sought to increase his access to oil money, prioritizing immediate spending on security over saving for the future and more targeted poverty-reduction programs.

The alteration of Law 001 not only violates Chad's agreement with the World Bank, but also reflects the weakness of technocratic solutions like Chad's much-lauded revenue management system in countries where people lack the means to hold their government accountable. The deteriorating security situation and deepening financial crisis in Chad--neither of which can be entirely dissociated from the country's growing oil sector--will ultimately take their toll on the people of Chad.

While the denial of donor support to the Chadian population is not desirable, there is little evidence that external financing provided to the government is benefiting the Chadian people. One hopes that the World Bank's decision to suspend lending to Chad will encourage the Chadian government to reconsider its scrapping of the revenue management provisions that represented some minimum safeguard against the abuse of oil money to the detriment of Chad's poor.

In the meantime, and perhaps more urgently, efforts need to focus on de-escalating the mounting tensions between Chad and Sudan, and within Chad itself, to avoid the outbreak of violence or war. Without greater security and political stability, no solution to the dispute over the use of oil money will suffice to ensure the welfare of the Chadian people.

Resources

Who’s working on this issue?

In Chad:

  • or ( or )
  • ()
  • ()

In North America:

  • Nikki Reisch, the Bank Information Center ()
  • , Oxfam ()
  • , Environmental Defense ()

Press

Civil society statements

World Bank Statements

Partner Spotlight: CEE BANKWATCH NETWORK

CEE Bankwatch Network strives to prevent the environmentally and socially harmful impacts of international development finance, and to promote alternative solutions and public participation. Bankwatch is a coalition, with fifteen member organizations loc


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See also

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Regions

Africa Asia Europe/Central Asia Latin America Middle East and North Africa

Institutions

AfDB ADB Bank of the South EBRD IDB IFC IMF MIGA World Bank (IBRD & IDA)

Key Issues

Accountability Debt Energy & Extractive Industries Environmental & Social Policies IFI Governance Infrastructure Trade Transparency U.S. Government Oversight

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