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BIC's fourth IF-Eye newsletter: IMF/World Bank Spring Meetings Special Issue

1 May 2006

BIC is proud to release the fourth issue of its biweekly newsletter publication, the IF-Eye!

IF-Eye Issue 4: May 1, 2006

2006 IMF/World Bank Spring Meetings Special Issue

In this issue:

  1. IFI Highlights
  2. Wolfowitz Watch: Spring Meetings Opening and Development Committee Press Conferences
  3. Issue Spotlight: Corruption Debate Continues during Spring Meetings; Considerations for the World Bank’s anti-corruption strategy
  4. Issue Spotlight: A New Energy Investment Framework: How Clean?
  5. Issue Spotlight: Heightened Security at IFI Meetings?
  6. Meeting Notes: EIR Implementation Meeting summary, IMFC and Development Committee Communique highlights, links to more summaries
  7. Upcoming Meeting: Peoples’ Forum Against the ADB events planned around the Asian Development Bank Annual Meetings
  8. Book Notes: Sebastian Mallaby on Globalization
  9. Announcements and Resources
  10. New at BIC: BIC welcomes Africa Program Assistant Joshua Klemm

1. IFI Highlights

2. Wolfowitz Watch: Spring Meetings Opening and Development Committee Press Conferences

Visit BIC’s Wolfowitz Watch webpage

Paul Wolfowitz Statement at the IMF/World Bank Development Committee Press Conference. April 24, 2006. Wolfowitz highlighted the importance of strengthening governance, to both avoid corruption and increase aid effectiveness. "Simply uttering the word corruption drives headlines," he noted, "but the real issue that we are addressing at the World Bank Group is how to promote good governance and accountability within our lending and project portfolios and in step with our development partners..." He outlined four keys to strengthening governance: a common diagnostic tool; effective policies and institutions; improved public financial management; and partnerships with developing countries and corporations. "Parliamentarians, NGOs, the media, and a wide range of other groups must have access to information in order to be able to track funds and hold officials accountable," he said.

Press Briefing with Paul Wolfowitz - IMF/World Bank Group Spring Meetings. April 20, 2006. Wolfowitz summarized the main findings of the 2006 Global Monitoring Report: Strengthening Mutual Accountability: Aid, Trade and Governance. He also noted his satisfaction with the Multilateral Debt Relief Initiative and expressed his confidence that the votes needed to move ahead with debt relief would be secured by the April 28 deadline (they were). He called for freer trade, noting its potential to have a greater impact on development than aid. Several activists interrupted Wolfowitz several minutes into his conference, unraveling a large banner reading "Corporate corruption, who can we thank? The IMF and the World Bank" and chanting the same.


3. Issue Spotlight: Corruption discussion evolves at the Spring Meetings; Considerations for the World Bank’s anti-corruption strategy

In an April 11th speech in Jakarta, World Bank President Paul Wolfowitz denounced corruption as "one of the biggest threats to development in many countries," claiming that it "weakens fundamental systems, it distorts markets, and it encourages people to apply their skills and energies in nonproductive ways." While many would agree on the negative impacts of corruption, opinions diverge on how the Bank should address this broadly recognized “development cancer”.

Former Bank President Wolfensohn forced more explicit recognition of "the C-word" in Bank operations, but action remained sporadic. Wolfowitz--who has faced an upward battle on many fronts since assuming office last spring--has made corruption a defining issue for his early tenure at the Bank. Thus far he has halted various project loans (and in a few cases overall lending) to Chad, Kenya, Congo Braazaville, India, Bangladesh, Uzbekistan and Argentina due to allegations of corruption.

Wolfowitz’s Plan? Wolfowitz cast early attention on the Department of Institutional Integrity. He reportedly plans to increase the department’s budget and staff, and has appointed Suzanne Rich Folsom as Director. Although Wolfowitz has praised the Folsom for her "deep understanding of the importance of accountability, discretion and reputational risk," in a January 23 Financial Times article Andrew Balls and Edward Alden noted that "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".

Wolfowitz offered a more comprehensive glimpse into his anti-corruption drive in his Jakarta speech. He highlighted the importance of addressing corruption at the country and project levels, and partnerships with civil society, the private sector, borrowing countries and other multilateral development banks as critical components to the World Bank approach.

Seemingly dissatisfied with this rough sketch, on April 23rd the Development Committee asked the Bank to develop clear and fair guidelines for strengthening governance and fighting corruption by the Annual Meetings in September. Wolfowitz acknowledged the need for a broad strategy at a press conference during the Spring Meetings, but cautioned against placing too much confidence in such a framework. “We have to be realistic,” he said. “We can't expect that a single anti-corruption standard would work in the broad, complicated development environment that we operate in every day. And we should not confuse having zero tolerance for corruption with a requirement for perfection in order to work with us. No country has achieved perfection when it comes to corruption; it is doubtful that any ever will. But what we can expect is progressive improvement over time.” Reportedly Graham Wheeler, one of the Bank's two new managing directors, has been tasked with developing a strategy.

Considerations for the World Bank’s anti-corruption strategy:

  • Any World Bank anti-corruption strategy must clearly define the appropriate role for the institution vis-à-vis governments, civil society, private firms and other multinational institutions. The Bank should not see itself – or act – as a global policeman.
  • The World Bank must take all appropriate internal steps to stamp out corruption. One move is to implement the recommendations of the Vaughn report, including measures to protect whistleblowers. Another is to stop doing business with major multinationals convicted of corruption, not just mom-and-pop businesses in developing countries.
  • The Bank will need to embrace stronger transparency and participation provisions in all stages of project design and implementation. Helping civil society, the media and the broader public to shine a light on unsavory projects is by far the single most effective mechanism to tackling corruption. This also includes moving towards the presumption of disclosure for all official documents, and implementing the Extractive Industry Review recommendations calling for minimum governance, transparency and human rights standards prior to approval of extractive industry projects in developing countries.
  • A comprehensive approach to corruption should also involve discussions on how to deal with odious and illegitimate debt.
  • Finally, the process through which the anti-corruption strategy and framework will be developed is critical to its success. A framework developed behind closed doors by a select group of Wolfowitz’s advisors is unlikely to generate the broad ownership that is necessary for it to succeed. Active participation of key external stakeholders is essential.

4. Issue Spotlight: A New Energy Investment Framework: How Clean?


At the behest of the G-8, the World Bank has drafted its first version of a framework to spur investment in the energy sectors of borrowing countries. Last year’s G-8 Gleneagles communiqué and action plan focused on the need for concerted efforts to address climate change, including in the development of new energy resources in developing countries. The Bank’s paper responds to this call, but at times is unclear how “clean ” an initiative it will be.

The paper—“Clean Energy and Development: Towards an Investment Framework”—projects the energy needs of developing countries over the next 25 years and levels of investment required to meet those needs (US$300 billion per year!), identifies some steps required to mitigate climate change, and argues that developing countries must adapt to climate change. The framework is global, not Bank-centric.

The paper identifies a number of critical action areas, most importantly the need for a post-Kyoto (2012) international regulatory framework for greenhouse gases. It also argues that some renewable energy technologies are ready for investment.

At the same time, the paper promotes high-tech coal burning and carbon storage technologies that may not be feasible for many borrowing countries. Controversially, it also asserts a need for nuclear energy and large hydro. The paper puts forward a vision of centralized expansion of energy supply (‘expand the grid’) that may not be appropriate for vast rural areas. At times it reads more like an investment strategy for large, middle-income countries rather than an initiative to provide “energy for the poor” in low-income countries.

The paper is vague on the need for the Bank to shift its lending portfolio towards clean energy development. Aside from the potential addition of several new financing vehicles (such as a clean energy development fund, a venture capital fund for renewables, and a power plant rehabilitation fund), it is clear that the Bank plans to continue financing large-scale fossil fuel extraction and transport operations.

The Development Committee asked the Bank to further develop the framework for consideration at the Singapore meetings in September 2006. The Bank will analyze existing investment vehicles to support energy development and will flush out its proposals for new funding mechanisms.

Bank shareholders expressed wildly divergent views on the framework paper, with Columbia, Russia, and Saudi Arabia (among others) arguing that it was “biased” towards renewables with Germany taking the opposite view and the Dutch noting the lack of a focus on energy provision for the poor.


5. Issue Spotlight: Heightened Security at IFI Meetings?

The ability to protest is an undeniably critical component of any democracy, and is a strategy employed by groups and individuals across the political spectrum. It is for this reason that some have raised concerns about seemingly heightened security measures at recent and upcoming IFI meetings. Past meetings in tightly-controlled states like Dubai and Qatar, examined alongside last month’s Inter-American Development Bank Annual Meeting and the upcoming IMF/World Bank Annual Meeting in Singapore might indeed suggest that while channels for participation might be slowly opening within the institutions, anything other than sanctioned participation is increasingly repressed.

Of particular concern was the 47th Annual Meeting of Governors of the Inter-American Development Bank, recently held in Belo Horizonte, Brazil and attended by over 10,000 bankers, private sector lobbyists, and government representatives. The largest meeting in IDB history, some have noted that this Annual Meeting was perhaps also the most guarded. Not only was the convention location, EXPOMINAS, constructed next to the main station of the Military Police of Minas Gerais—complete with helipad and stables for mounted units—the government of Minas Gerais turned the center, and the city, into a veritable citadel, according to reports. Military police patrolled the city on foot, motorcycle and horseback in an effort to prevent protesters from Brazil’s Landless Movement, the Movement of Dam-Affected People, and the Teacher’s Union from approaching the conference.

Inside the EXPOMINAS fortress the IDB spoke of closing the gap between “the region’s improved economic performance during recent years and the persisting problems of poverty and inequality”, while thousands of protesters (who had marched for three days from Ouro Preto) protested the IDB’s projects and policies at a distance. Initially denied entry into the city, the protestors were eventually allowed to congregate at a site a considerable distance from EXPOMINAS. A delegation planning to present a letter calling for an end to IDB-sponsored projects and policies that have raised electricity rates and displaced communities was denied access to the inaugural meeting. Clashes between police and protesters eventually led to a dozen arrests.

Additional evidence of a potential trend towards heightened and aggressive security measures at IFI meetings might indeed be gathered at the meetings scheduled for the coming year. The 39th Annual General Meeting of the Asian Development Bank will be held in Hyderabad, India from May 3 to May 6. Security measures include the installation of “an access control system based on radio frequency identification [that] would be placed at all entry and exit points for scrutinizing every individual entering the venue” reports the Hindu newspaper. In another part of Hyderabad, activists from the region will be gathering at the Peoples Forum Against the ADB to discuss concerns including displacement, reclaiming democracy, power and water privatization, militarization, and the environmental, social and livelihood impacts of ADB-funded projects. Interactions between police and participants involved in alternative actions will be important to monitor.

Finally, the September 2006 IMF/World Bank Annual Meeting in Singapore has already received considerable attention from civil society organizations and the public. Those who support public mobilizations and demonstrations are concerned that in Singapore, where a permit is required to have a political gathering of 4 or more people, their opinions will be stifled by the heavy-handed Singaporean government and its strict laws against public expression. It should be noted that the World Bank is taking steps to discuss the matter with the Singaporean government, and hosted a meeting to discuss concerns with civil society organizations during last week’s Spring Meetings.

Will the upcoming ADB and IMF/World Bank meetings continue the trend toward heightened security? If so what can be the cause of this pattern? Is it that protestors’ demands are increasingly being heard and are thus threatening to the IFIs? Are the concerns of individuals and groups not being heard within the institutions finding public demonstrations a more effective means of engagement? These are critical questions to explore by both civil society and the institutions themselves.


6. Meeting Notes: EIR Implementation Meeting summary, IMFC and Development Committee Communique highlights, links to more summaries

Highlights from EIR Implementation Meeting with Rashad Kaldany, April 2006

  • Measuring Poverty Impacts: Kaldany stated that measuring impacts was extremely important and that he shared the same objectives as NGOs. He noted that the IFC is not yet where it should be on measuring poverty impacts, and that he would like projects to have clear poverty objectives. He used the Marlin mine in Guatemala as an example of good practice because the project sponsor is disclosing monitoring reports. Although NGOs are pushing for project-level reporting, reporting on poverty impacts will be done only in the aggregate for EIR implementation and across the IFC. Civil society also raised concerns about failures to create livelihood opportunities and negative impacts associated with involuntary resettlement; Kaldany stated that his objective was to make affected people better off than without the project (instead of simply doing no harm). He cited the Yanacocha mine in Peru as an example of success, stating that the nearby town had the highest rate of cell phone penetration in Peru.
  • Clean Energy Framework: The EIR group did not have much involvement in the World Bank’s Clean Energy Framework. When asked how this new emphasis on clean energy would affect IFC financing for fossil fuels, Kaldany replied that he saw no conflict with the management’s response to the EIR, i.e., the IFC will not be phasing anything out. Although the IFC has not financed any “new” coal projects in the last decade, Kaldany said this may change in the next two or three years due to the high prices for oil and gas. The IFC will continue to say no to nuclear projects. When asked if the IFC will now be accurately accounting for carbon costs, Kaldany replied that the Clean Energy Framework simply provides more scope to do renewable energy. The IFC is looking in new directions, such as gas flaring, clean coal, and biofuels. Kaldany stated that the concept of energy transition is what is important in the clean energy framework.
  • Governance Indicators: In response to a question on how the IFC’s approach on governance has been influenced by developments in Chad, Kaldany replied that he still hoped that there would be a positive outcome in Chad. He said that the IFC learned again how important the role of NGOs is to governance.
    - CPIAs will be made public in the next few weeks and will be cited in the SPIs.

The Development Committee Communique. The Development Committee met on April 23.

  • It noted the critical importance of good governance and fighting corruption, and “called on the Bank to lay out a broad strategy…for helping member countries strengthen governance and deepen the fight against corruption” by the Annual Meetings in September.
  • The Committee welcomed the completion of the Multilateral Debt Relief Initiative, urged donor countries to meet their commitments and called on the World Bank and the IMF to improve low-income countries’ debt-sustainability frameworks.
  • One of the most anticipated discussion items was clean energy. The Committee supported the Bank’s approach to discussing energy needs and access of developing countries, the need to control greenhouse gas emissions, and helping countries adapt to the risks posed by climate change. It also asked the Bank to explore both existing and new financial instruments to support investments in clean energy technologies.
  • The committee “welcomed the discussion of quota and voice issues in the Fund, and confirmed [their] intention to continue [their] discussions with a view to building the necessary political consensus on voice issues in the Bank.”
  • The Committee asked the World Bank to improve its strategy for working with middle-income countries by September’s Annual Meetings.
  • The committee highlighted the importance of universal access to primary education, and asked for a progress report on Education for All by its next meeting in September.

Communique of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund. The IMFC met on April 22.

  • The Committee welcomed continued expansion of the global economy alongside strong containment of inflation.
  • It noted the risks of “continued high and volatile oil prices, the potential for an abrupt shift in global financial market conditions, a rise in protectionism, and a possible avian flu pandemic.”
  • The Committee also highlighted several global imbalances, noting the importance of “raising national savings in the United States…implementing structural reforms to sustain growth potential and boost domestic demand in the euro area and several other countries; further structural reforms, including fiscal consolidation, in Japan; [and]…allowing greater exchange rate flexibility in a number of surplus countries in emerging Asia [read:China]” to offset risks associated with those imbalances.
  • The Committee also stressed the importance of successful completion of the Doha Round, urging all members to resist protectionism.
  • On its medium-term strategy, the Committee highlighted the “importance of fair voice and representation for all members.”
  • It proposed a new framework for IMF surveillance, consisting of: increase surveillance on multilateral issues, restatement of member country commitments under Article IV, a multilateral surveillance tool, and an annual remit for surveillance which “should involve the independence of Fund surveillance, greater transparency and the Independent Evaluation Office.”
  • Finally, the Committee applauded the creation of new instruments that will allow the institution to increase its support for low-income countries, as well as the establishment of a committee to review World Bank-IMF collaboration.

Read more meeting summaries:


7. Upcoming Meeting: Peoples’ Forum against the ADB events planned around the Asian Development Bank Annual Meetings

The 39th Asian Development Bank Annual Governors meeting will be held in Hyderabad, India from May 3-6 2006. A parallel forum of civil society organizations, organized under the banner Peoples’ Forum against the ADB (PFAADB), is planning an alternative summit in Hyderabad at the same time. Denouncing the ADB as “extremely secretive, non-transparent and unaccountable”, the PFAADB has planned meetings on displacement, reclaiming democracy, power and water privatization, militarization, and the environmental, social and livelihood impacts of ADB-funded projects. Read more about the Peoples Forum on the PFAADB website.


8. Book Notes: Sebastian Mallaby on Globalization

Notes on selected articles and reports that have circulated in the past month

Why Globalization Has Stalled
By Sebastian Mallaby
April 24, 2006.

Washington Post columnist Sebastian Mallaby addresses current challenges facing international financial institutions and other multilateral organizations in an April 24 piece titled “Why Globalization Has Stalled”. Noting a sharp decline in the number of activists and protestors at the IMF/World Bank Spring Meetings this year, stalled trade negotiations at the World Trade Organization and stalemates at multilateral institutions, the author declares that, "anti-globalization may have lost its voice, but so has globalization.” With Wolfowitz’s cavalier approach to decision making and the loss of confidence by many nations in multilateral lending efficiency, Mallaby argues that key players are beginning to walk away from larger negotiating tables and are now pursuing more bilateral strategies. “It’s not that the underlying forces of globalization have gone limp; it’s that nobody wants to invest political capital in global institutions,” he notes. The most disturbing impacts will be military and political, he notes, citing the current situations in Iran and the Sudan as powerful examples of what might result from this new system. While the United States was once a “plausible quarterback for the multilateral system…[its] unilateralism has tragically backfired, destroying whatever slim chance there might have been of a workable multilateral system.” Read "Why globalization has stalled" on the Washington Post website


9. Announcements and Resources

10. New at BIC: BIC welcomes new Africa Program Assistant Joshua Klemm

Joshua became BIC’s Africa Program Assistant in April 2006 after spending a year and a half with the local Transparency International chapter in Freetown, Sierra Leone, the National Accountability Group. He worked with NAG from the time its office began operations, heading its research team while training the local staff on project development, report writing and basic computer literacy. He also served as a consultant with the Centre for Economic and Social Policy Analysis (CESPA), a Sierra Leonean think tank, in conducting a nationwide Service Delivery Perception Survey of the health, education and agriculture sectors in 2006. Joshua received a B.A. degree from James Madison University in International Affairs, and spent two semesters abroad at the University of Ghana-Legon, where he interned part-time at the Ghana Centre for Democratic Development. He speaks French and Sierra Leone Krio, and is married to a Sierra Leonean.

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