22 November 2006
BIC's November 22, 2006 IF-Eye newsletter discusses the World Bank's funding of a controversial Uruguay pulp mill, and key concerns about the World Bank's anti-corruption strategy. It also spotlights recent civil society and international development institution news.
In this issue:
- IFI Updates
- Civil Society Highlights
- Spotlight: World Bank approves funding for controversial Uruguay pulp mill
- Spotlight: World Bank anti-corruption strategy update: key concerns, consultation process begins
- Announcements and Resources
World Bank to review conditions attached to loans. World Bank. November 21, 2006. The World Bank Board of Directors will discuss controversial requirements (conditions) attached to loans on December 5, 2006. Discussion will be based on the new report “Good Practice Principles for the Application of Conditionality: A Progress Report”.
Inter-American Development Bank cancels debt of five Latin American countries. IDB. November 17, 2006. Debt relief for Bolivia, Guyana, Haiti, Honduras and Nicaragua will total between $2.1 and $3.5 billion, depending on when the cancellation takes effect.
World Bank Africa Vice-President Resigns. World Bank. November 17, 2006. Vice President Gobind Nankani considered Wolfowitz's "latest casualty".
IFC accepting comments on five Environmental, Health, and Safety Guidelines (EHS Guidelines) until January 26, 2007. World Bank/IFC. November 17, 2006. This fourth group of guidelines joins the draft general EHS guidelines and draft industry sector guidelines posted earlier this fall.
World Bank, African Development Bank, UN promote carbon credits for Africa. World Bank, AfDB. November 17, 2006. Agencies encourage donor countries to channel more Clean Development Mechanism (CDM) projects to Africa under new "Nairobi Framework".
World Bank anti-corruption strategy open for comment. World Bank. November 13, 2006. Comments on the controversial strategy will be accepted for an unspecified amount of time.
European Bank for Reconstruction and Development issues draft procedures on disclosure requests and appeals process. EBRD. November 6, 2006. Comments accepted through December 6.
Where Oil flows, Debt grows. BIC, Jubilee USA, Rainforest Action Network, Oil Change, Amazon Watch, Friends of the Earth US. November 14, 2006. Groups challenge World Bank and US Government controversial support of Big Oil in Financial Times advertisement.
"Flying Low: The UK Export Credit Guarantee Department and Climate Change." WWF. New report highlights the incoherence between the UK Export and Credit Guarantee Department (ECGD) and the commitments of other government departments over tackling climate change.
Adoption of a new anticorruption strategy at the World Bank may lead to changes in the Bank's disclosure policy. freedominfo.org. November 13, 2006.
Jorge Daniel Taillant of CEDHA and fellow supporters brave fierce weather to protest the Botnia pulp mill in front of the World Bank on November 16, 2006.
The World Bank approved $170 million in International Finance Corporation (IFC) financing and $350 million in Multilateral Investment Guarantee Agency (MIGA) guarantees for Metsa-Botnia’s controversial Orion pulp mill in Uruguay on Tuesday.
The Board was originally scheduled to vote on the project last Thursday, but postponed the vote at the last minute in response to a request from one of its members.
Once a project reaches the Board, unless highly contentious, it is usually approved. Approval of a project is generally reached by a consensus among Board members. Reuters reports that the lone vote against the project was cast by the Argentine Executive Director, who represents six Latin American countries including Uruguay.
Tensions around the controversial project have swelled in past months. People from the Argentine town of Gualeguaychu have blocked Highway 136 in protest indefinitely, and the King of Spain has stepped in to mediate the conflict. While many in Uruguay see potential economic benefits from the project, Argentine communities located across the river from the mill fear its potential to disrupt local tourism and harm the environment.
Some have described the current situation as a “time bomb,” with the potential to incite conflict between the two countries.
In response to the decision, the Argentine NGO Center for Human Rights and Environment (CEDHA) stated: "Today the Board of Directors of the World Bank, against all legal reasoning and social opposition, approved two loans to Botnia to construct one of the world’s largest pulp mills ever." The organization led a delegation to Washington DC last week to meet with World Bank officials, press for the suspension of the Board vote, and protest the project outside the Bank’s headquarters on 18th Street.
CEDHA claims that thousands of local people awaited the Board’s decision on Highway 136, the road spanning the river between Argentina and Uruguay.
Reuters reports that the Uruguayan government told the Bank’s Board of Directors that “the project represents huge economic benefits, jobs and development opportunities for the country.”
Because the disputed mill could be in violation of a bilateral treaty between the two countries, the International Criminal Court (ICJ) is in the process of reviewing the case. Many of the parties involved are concerned that the IFC's approval of the project, before the ICJ's final ruling, sets a dangerous precedent of intervention by the World Bank in an international dispute.
Find out more:
The World Bank’s anti-corruption strategy is trudging forward, in spite of continuing tensions over the content and tone of the framework. Although the paper has not yet been approved, the Bank’s Board of Executive Directors approved a Work Plan on November 9 that outlines next steps, including a consultation process. Find out more about the Work Plan and consultation process on BIC’s website.
What people are talking about: While this is by no means an exhaustive list or treatment of the issues, following are some key points of concern for civil society groups monitoring the development of the strategy:
The appropriate role for the Bank: The Bank may have a particular role to play in fighting corruption and promoting good governance. However, other entities and organizations are better prepared to handle and advise many aspects of the fight. Although the Bank has voiced interest in collaborating with other actors, the strategy currently assumes an overly ambitious role for the institution. Furthermore, the Bank must not lose sight of its poverty reduction mission.
Governance and corruption: Fighting corruption is one component of good governance. Many have criticized the framework for its rough blending of the two and subsequent lack of attention to other important aspects of good governance, including national democratic processes and citizen participation. Good governance can also include issues regarding human rights; the Bank’s role in this area is highly controversial and/or unclear.
Conditionality: Debate continues over what are appropriate requirements (conditionalities) for donors to place on governments as conditions for access to aid resources. Past controversies over onerous economic and policy conditionalites are resurfacing in the context of potential governance conditionalities.
Department of Institutional Integrity (INT) Review: The Board specifically asked for an independent review of INT in the Work Plan, and it will certainly draw the attention of many monitoring the strategy. Paul Wolfowitz has increased INT’s capacity and given it a more proactive mandate since taking office. However, his appointment of controversial Republican ally Suzanne Rich Folsom to head the department has raised eyebrows.
Debt: Concerns focus on past and continued lending to corrupt regimes, establishing systems to ensure that debt relief benefits the poor, and removing conditionalities from debt relief. Countries must also address the outflow of stolen assets from developing nations. Some thorny questions arise in the discussions on debt and corruption, including whether and how the Bank should continue to engage with highly corrupt regimes.
Transparency: Transparency in both Bank and country operations is critical to fostering the demand side of good governance, and the institution must pay adequate attention to both. Many groups see the anti-corruption strategy as an opportunity to renew long-standing calls for increased transparency in project preparation and implementation.
Extractive industries: Oil, gas and mining projects are highly vulnerable to corruption and prone to poor governance, the impacts of which fall disproportionately upon the poor and the environment. Many are watching whether the Bank’s strategy will increase transparency and accountability in the sector, arguing that it should more robustly address concerns ranging from tracking budgets and revenue streams, to identification and development of projects.
Infrastructure: The Bank is increasing investments in large high-risk infrastructure projects, and has recently merged the Environment and Infrastructure Departments into a new Sustainability Network. The framework needs to aggressively address how projects are selected in problem sectors and ensure the release of supervision reports throughout project implementation.
Private sector, particularly northern companies: The responsibility of the private sector for corruption and its role in fighting corrupt practices and promoting good governance is underplayed in the current strategy. Increased focus on the role of the private sector acknowledges both the supply and the demand sides of corruption.
Whistleblower protections: The Bank is currently revising its whistleblower protection system. While not officially a part of the anti-corruption strategy, these protections are an essential component to promoting accountability inside the institution.
The details: The strategy suggests the creation of several specific new mechanisms, including anti-corruption plans and governance diagnostics. Development and consistent application of these mechanisms is a key concern.
Find out more on BIC’s World Bank Governance and Anti-Corruption webpage.
Boom Time or Blues? The Gender Impacts of Big Oil Projects Financed by International Financial Institutions. Workshop sponsored by Gender Action, Heinrich Böll Foundation North America and Bank Information Center. November 29, 2006, 3-5pm. Carnegie Endowment for International Peace. RSVP to Anke Merziger:
The New Financial Architecture: a Ruin? Making Financial Markets World for Development. World Economy, Ecology & Development (WEED). November 29-30. Berlin, Germany.
Norwegian Conditionality Conference. November 28-29, 2006. Oslo, Norway. The Norwegian government is holding an official international conference to discuss more appropriate and effective development finance conditionality. Civil society participation is limited to November 28. The Norwegian Forum for Development and Environment is coordinating participation of civil society at the conference, and planning additional events for civil society organizations.