2 August 2006
BIC's newest policy brief argues that although sustainable development is an elastic concept, with the merger of the World Bank's environment and infrastructure networks World Bank President Paul Wolfowitz may have just stretched it to the snapping point.
Sustainable development is an elastic concept, accommodating divergent approaches to poverty alleviation, environmental protection, and social justice. But World Bank President Paul Wolfowitz may have just stretched it to the snapping point.
On June 27, World Bank President Paul Wolfowitz announced that he is merging the Bank’s central environment and social development departments into its infrastructure and energy units and that the new conglomeration will be called the “Sustainable Development Network” – to be led by the former Infrastructure Vice President. For the first time, large-scale infrastructure projects such as oil pipelines, mining operations, and transportation hubs will don the sustainable development label.
Will the merger lead to greater environmental and social sustainability of Bank operations? Or does it amount to a hostile takeover in which environmental and social development staff are reduced to an infrastructure service center?
Mainstreaming environmental and social sustainability into Bank operations has been a longstanding goal of internal Bank reformers and external critics over the past twenty years. Merging the Environmentally and Socially Sustainable Development (ESSD) and Infrastructure Networks could lead to improved, more sustainable development outcomes, provided that senior managers steer Bank operations in that direction. However, before everyone breaks out the champagne, several cautionary flags should be raised.
An entrenched infrastructure agenda
Critics charge that the Bank’s infrastructure agenda is biased toward export-oriented mega-projects that do not target the needs of the most disadvantaged, often rural, populations. Given the push to aggressively expand infrastructure lending (with a target of $10 billion a year or 40% of the Bank’s portfolio by 2008), environmental and social development staff may simply be grafted onto an entrenched agenda without being able to change its content or character.
More mainstreaming?
Despite President Wolfowitz’s claim that the “purpose of consolidating these two networks is to mainstream environmental issues,” the merger will not by itself achieve this objective. Critically, the reorganization does not affect the core drivers of the Bank’s policy agenda such as the Poverty Reduction and Economic Management (PREM) and Human Development Networks or the Development Economics Vice-Presidency. Absent Bank-wide commitments, sustainable development approaches will not be integrated “upstream” in sector and country strategies. The main problem, however, is less a question of bureaucratic organization than one of political will. Without Bank-wide senior management commitment to social and environmental sustainability, we are likely to see little difference in operations.
Loss of a semi-independent voice
As in all large organizations, bureaucratic infighting is rife as units jockey to assert their agendas and interests. Environmental and social issues have often been at the center of such Bank infighting. The central environment unit, represented by its own Vice President, could serve as a counterweight to the “build it now, fix it later” factions. With resources and authority, the ESSD VP could perform at least a minimal internal check and balance role, and had direct access to the President. Merging ESSD and Infrastructure muddles this function, as there will be strong pressure within the network to suppress differences so the new Sustainable Development VP (SDVP) can present a unified position. The merger raises the bar on the qualifications and outlook of the occupant of the new SDVP slot.
What about the safeguards?
It is unclear how the merger will affect accountabilities for the safeguard policies. The safeguard compliance team – the Quality Assurance and Compliance Unit (QACU) – will be split off from ESSD and incorporated into the Operational Policy and Country Services (OPCS) Vice Presidency. OPCS is not the home of environmental and social specialists. The compliance team could be a fish out of water without the support network previously provided by ESSD.
The merger will also increase external stakeholder skepticism regarding future safeguard revisions.
More bureaucracy
The merger of the Infrastructure and ESSD units will create a “super vice presidency” at the Bank. Infrastructure already was the largest stand-alone network ($8.6 billion out of a total of $22.3 billion in 2005) and ESSD was the third largest ($3.9 billion in 2005). The new network will now have lead responsibility for nearly 60% of the Bank’s portfolio. To oversee this sprawling “bank inside the Bank,” the new SDVP will most likely need further senior managers. The added bureaucratic layers may move former ESSD staff further away from senior decision makers.
A “world-class environmental expert”?
President Wolfowitz acknowledged that “there are concerns that environmental issues in this new arrangement could be submerged by infrastructure. I am committed not only to sustaining, but strengthening the role of the Bank’s environment team. … To this end, I plan to create a new position to be filled by a world-class environmental expert to lead our efforts.” Dumping the position of a dedicated VP for sustainability and replacing it with a yet-to-be defined “world class environmentalist” (whom in all likelihood will be appointed by and report to the former Infrastructure VP) is an odd way of showing the Bank’s strengthened environmental commitment. Observers will need to track how this position is defined. The last thing the Bank needs is a leading environmental expert without significant line authority.
And what happens in the regions?
What effect will this merger have in the ever-powerful regional departments – where the Bank’s actual lending operations are housed? And who becomes the Sustainable Development Sector Director in the regional offices – the former Infrastructure head or the former ESSD director? Will the merger force regional environmental and social development staff to dampen critiques of proposals made by their own network? It is unclear how this reorganization will affect the role and authority of these specialists, but it will no doubt create more serious conflict of interest issues.
Tucking the Bank’s entire infrastructure portfolio under the mantle of “sustainable development” is a bold, if not audacious, move. Too often sustainable development is seen as a set of enclave operations limited to the domain of environmentalists rather than a comprehensive approach to the poverty, equity, and environmental dimensions of energy development and distribution, mining, transport, and water supply and sanitation. The Bank argues that the merger is a key step in this direction.
Will it be business as usual?
President Wolfowitz, SDVP Sierra, and Bank managers need to demonstrate that the merger is not simply a maneuver to facilitate infrastructure expansion. Will it be business as usual or will the Bank place sustainability and the delivery of benefits to – and participation of – its poorest stakeholders at the core of decision-making?
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