2 February 2007
This week's IF-Eye newsletter spotlights the World Social Forum, the World Bank corruption plan, the Extractive Industries Review, IDB restructuring and provides updates on recent civil society and international financial institution news.
IF-Eye
Issue 13: February 2, 2007
A publication of the Bank Information Center
Find full text below.
In this issue:
1. IFI Updates
2. Civil Society Highlights
3. Spotlight: World Social Forum: another world in sight, but still distant
4. Spotlight: World Bank corruption plan still needs improvement
5. Spotlight: Comments on the World Bank Group's Extractive Industries Review Implementation Report
6. Spotlight: Inter-American Development Bank Restructuring: What does it mean?
7. Announcements and Resources
Dispute between Wolfowitz and Bank Board becomes public. World Bank. January 31, 2007. Referencing key board documents, investigative journalist Richar Behar exposes deep tensions between World Bank President Paul Wolfowitz and the Bank's Board of Directors.
Compliance Advisor Ombudsman of the IFC seeking comment on its draft revised guidelines. CAO/World Bank. Comments accepted through February 9, 2007 at: cao-compliance@ifc.org. The draft guidelines are available at: www.cao-ombudsman.org. For more information on civil society activities, contact Bruce Jenkins, bjenkins@bicusa.org or Jennifer Kalafut, jkalafut@bicusa.org.
Expert panel advises International Monetary Fund to sell $6.6 billion worth of its gold to stay afloat. IMF. January 31, 2007. The group has advised the International Monetary Fund (IMF) to use the capital earned from selling $6.6 billion dollars worth of its gold to invest in assets that would yield higher returns. The body suggested that the IMF invest its money soon in order to accumulate enough money to cover the administrative costs that were once covered by the interest payments of borrowing countries which have largely been repaid ahead of schedule.
Wolfowitz praises Turkey as "success story of the World Bank". World Bank. January 29, 2007. Speaking to reporters in Turkey this weekend, World Bank chief Paul Wolfowitz hailed Turkey's economic growth and described the country's transformation as an example for others to follow.
International Finance Corporation to open 45-day consultation period on human rights impact assessment. IFC/World Bank. Consultations will last February-March.
Gordon Brown urges reform of UN, World Bank and IMF. World Bank/IMF. January 24, 2007 The Chancellor of the Exchequer of the United Kingdom, Gordon Brown, called for "modernization and reform" of the United Nations, the World Bank, and the International Monetary Fund, at a keynote speech in India on January 17, 2007.
Asian Development Bank prepares for South Asia regional consultation on its Safeguard Policies. ADB. The consultation will collect the opinions of stakeholders from eight countries March 26-27.
Over 60 organizations sign letter critiquing World Bank's new Health, Nutrition and Population (HNP) Strategy. Various organizations. January 24, 2007. More than 60 civil society organizations signed a letter addressed to President Wolfowitz expressing concern over the strategy.
Knowledge Bank-rupted: Evaluation says key World Bank research 'not remotely reliable' Bretton Woods Project. An evaluation by a panel of self-described 'academic superstars' has cast doubt over the independence and reliability of World Bank research.
Mortgaging Iraq’s oil wealth. Bretton Woods Project. As a "key ingredient" of IMF lending and debt relief, Iraq's government has just presented a new draft petroleum law to its cabinet that could permit up to two-thirds of Iraq's known reserves to be exploited by multinational oil companies under contracts lasting for 20 years.
Have a Heart and Cancel Liberia’s Debt! Africa Action, the Institute for Policy Studies, Jubilee USA. Join us in a plea to the U.S. administration and international community to cancel Liberia's $3.5 billion illegitimate debt burden. Over 1000 valentines hearts addressed to U.S. Treasury Secretary Henry Paulson have been collected.
Debt sustainability or defensive deterrence? Eurodad. January 10, 2007. New report looks at the World Bank's free rider policy and the rise of emerging lenders.
BIC releases new country updates for: Indonesia, Azerbaijan, Kazakhstan, Kyrgyz Republic, India, Bangladesh and Pakistan. BIC. January 2007. Information about recent developments and civil society concerns related to International Financial Institution (IFI) involvement in the countries, including that of the World Bank and the Regional Development Banks.
Who’s Afraid of China in Africa? Ndubisi Obiorah. December 14, 2006. The relationship between China and Africa has skyrocketed in the past decade. Africans must understand the country, its motivations, and the new opportunities and challenges its activities present.
The World Social Forum was held in Africa for the first time earlier this month. For five days, more than 50,000 people gathered in Nairobi, Kenya, to discuss the most pressing issues affecting social, economic and environmental justice in the world today – to voice outrage, to celebrate progress, and to share inspiration. Turnout was lower than expected and considerably lower than in past years, when up to 200,000 people attended the Forums held in Porto Alegre, Brazil, and in Mumbai, India. This was in part because local residents typically make up the bulk of attendees, and there were relatively few Kenyan participants. Indeed, a dispute arose over fees charged for entry, prompting a protest and direct action by Kenyans who demanded and eventually received a waiver of the registration fees. While the event placed African struggles and activists in the limelight, according to some commentators, it also showcased Africa’s weaknesses, laying bare the resource constraints facing African civil society and the moral and political compromises which can arise in their wake.
The motto of the social forum may be “another world is possible,” but the event didn’t manage to escape the realities of this world, in which money talks – and divides – buying access, privilege, and voice. Many participants were aghast at the ubiquity of Celtel’s logo (a cellular telephone company that had exclusive rights to sell mobile phone services – and advertise – at the WSF) and at the high price of food and water inside the venue, sparking concerns about the corporatization and elite capture of the Forum.
Commenting on the Forum, Pambazuka news director, Firoze Manji, remarked that the event resembled “a trade fair” where “those with greater wealth had more events in the calendar, larger (and more comfortable) spaces, more propaganda – and therefore a larger voice.” In this context, Manji argued, international NGOs essentially bought a greater presence at the Forum than social movements and local organizations, although the latter had equally, if not more important and pertinent messages to share .
In spite of concerns, there is much to praise about the WSF…not least, its diversity. One could find a bit of everything in Nairobi, from discussions on racism and panels on labor movements, to talks on HIV treatment and solar cooking classes; from debates on agricultural trade and sessions on anti-privatization strategies, to protests against war and exhibits of crafts from women’s cooperatives. Amidst the various issues, however, several themes emerged as particularly salient: economic (in)justice; war/militarization; and natural resource control.
Read the complete article: www.bicusa.org
The World Bank’s Governance and Anti-Corruption Strategy underwent another round of scrutiny this week when Bank Management presented the Board of Directors with feedback gathered through the round of external consultations that closed on January 26. Following are outcomes from that meeting, as well as excerpts from BIC’s recent comments on the strategy.
Tuesday January 30 Board meeting highlights:
- Consultations reached over 3200 people through face-to-face meetings, video-conferences and the web. Process was considered successful, in spite of continuing civil society concerns about the timeliness of notification, posting of feedback and guarantees of its incorporation.
- The Board asked Management to incorporate feedback into the draft by March 1. The paper will be reviewed by the Board on March 20, and the Development Committee during the April Spring Meetings. BIC strongly advocates for the immediate public disclosure of the March 1 draft.
- Management will develop an implementation plan by the end of the fiscal year.
Key points raised during the consultations:
- The Bank should strive to stay engaged, even in poorly governed countries.
- Consistent treatment of borrowing countries is based on clear and objective criteria.
- The institution should engage more with the private sector.
- The Bank must regularly consult a broad range of stakeholders. Measures such as public participation in policymaking, participatory local governance, civil society access and parliamentary oversight are critical.
- Country-level accountability processes must be leveraged. The Bank should incorporate greater disclosure, participation, and third-party monitoring in the way it conducts its operations. (BIC strongly advocated for this point in comments submitted during the consultation process.)
- Governance monitoring must be linked to governance reform.
- The Bank should coordinate with other stakeholders, especially in high-risk settings.
BIC comments on the strategy:
Meaningful stakeholder participation is a core element for efforts related to improving governance and fighting corruption. Key components include: Explicit strategy for consultations during GAC implementation; scale-up participatory activities that promote good governance in development policy lending operations; scale-up participatory initiatives that promote good governance in investment operations
Timely and adequate information disclosure is also critical. Components include: public consultation during upcoming Disclosure Policy review; contract and revenue transparency, and greater openness and information disclosure throughout the project cycle. The Bank should subscribe to the Global Transparency Initiative’s “Transparency Charter for International Financial Institutions”. Indicators for measuring and monitoring governance and corruption within member countries should be developed in a participatory and transparency fashion, and disclosed to external stakeholders.
Greater attention is required to address corruption/poor governance at the project level. The Bank must avoid financing certain operations where the risks in the project or in the sector are too high. Upstream options assessments should also be made more routine – especially for large, high-risk project investment operations.
The Bank must also improve governance and reduce corruption at home. The institution should carefully evaluate representation on the Board of Executive Directors, and amend voting structures to more adequately represent the institution’s membership. The selection of the World Bank President must also be made transparent and democratic. The Bank needs to also put in place a credible evaluation framework to assess implementation on the GAC framework. The Department of Institutional Integrity (INT) plays an important role in ensuring responsible operations within the institution. We applaud efforts to launch an independent review of INT. Independent audits of the Bank’s operational effectiveness and internal control mechanisms must be publicly disclosed.
The role of the private sector as a source of corruption (the negative side of the coin) is underrepresented in the document. The Bank needs to develop a more rigorous process to screen and choose private sector clients. All too often, business confidentiality is overextended to give cover to the private sector. We are also concerned that the GAC framework not be used to push privatization or certain types of reforms that are considered quite controversial in the eyes of the public.
Finally, a noticeable absence in the GAC framework is any explicit recognition of human rights in assessing governance.
Find out more on BIC’s Governance and Anti-Corruption webpage: /en/Issue.30.aspx
The World Bank recently released its annual report on Bank Management’s progress in implementing the recommendations laid out in the 2003 Extractive Industries Review (EIR).
The EIR was a three-year, independent evaluation of World Bank Group support for the oil, gas and mineral sectors. Its final report presented a series of recommendations, including that the World Bank Group should not support EI investment in countries where pro-poor governance is inadequate.
The World Bank Group’s Management responded to the EIR in 2004 by proposing modifications to its EI operations and related policies. Its modest reform commitments were grouped under the headings of governance, revenue and contract transparency, information disclosure, environmental and social impacts, and poverty alleviation.
Some findings and reactions:
- World Bank Group EI operations have increased substantially – between 37%-44%. The report under-reports this figure by 4-7%.
- The IFC’s private sector EI portfolio for FY06 ($508.9 m) has increased at least 52% over FY05 ($334.3m). This fact is not disclosed in the report. The figure jumps to 60% if the overlooked Alliance Oil project is included. The World Bank EI increase is equal to 37%.
- IFC oil projects receive the largest share of EI investment. Oil projects represent 47% of the IFC’s EI projects; gas 37%; and mining 16%. The major share of World Bank investment was for gas infrastructure and MIGA’s only EI project guarantee was for mining (US$ 110 m).
- The report still does not provide any tracking of management response (MR) commitments across projects – not project-by-project or aggregate project results for each MR commitment. The report only includes selected project-level information on selected EIR related issues. The report also lacks updated information on implementation.
- The report fails to provide trends based on indicators outlined in the EIR, such as poverty reduction, economic diversification, or improved social and environmental conditions/programs.
- The report fails to provide significant project or country-level results, and lacks information on critical issues such as contribution to PRSP goals, poverty reduction, consideration of alternatives, best international practice measures, net employment effects and negative impacts.
- The MR commitment on the disclosure of governance assessments and on the disclosure of how governance considerations apply to sequencing and project design decisions is still not being met, and there is no indication of any intention to do so.
- Poverty monitoring is not transparent or accountable.
- There are no specific examples provided on the criteria used to assess the level of community support for any EI operation.
- Although it is generally believed that the WBG is making some positive progress on revenue transparency, the report does not discuss the Bank’s initiatives in this area.
Resources
Inter-American Development Bank (IDB) President Alberto Moreno proposed to "realign" the institution at the 2006 Annual Meetings in Belo Horizonte. The proposal builds on the "New Lending Framework" introduced in 2005.
Why change now? The institution was last retooled in 1994, during the waning days of structural adjustment and in the same year NAFTA came into effect. More importantly, however, the IDB is facing severe questions about its relevance. Subregional lenders like the Corporacion Andino de Fomento (CAF), national institutions like the Banco Nacional de Desenvolvimiento Economico e Social of Brazil, governments like the Chinese, as well as revenues from hydrocarbon and mineral exports are increasingly financing development projects in the region. A new crop of socialist and left-leaning governments in Latin America are furthermore dubious of the merits of doing business with the international financial institutions and their neoliberal blinders.
Some key points of the realignment include:
- Restructuring the institution into four powerful vice presidencies which will report directly to the president and executive vice-president. While this reorganization will allow the IDB consolidate its knowledge base, it is unclear how these intellectual nodes will relate to the centers of lending and budgetary power.
- Increasing decentralization. This is considered a key demand of the borrowing countries, especially as it related to fiscal controls, internal procedural controls, and procurement. Currently, the IDB insists on its own oversight systems, but borrowing nations are pushing for approaches that utilize country systems. By and large, the U.S and Europeans are against ceding these Bank risk reduction measures to the borrowers, and letting the proverbial fox run the hen house.
- The fate of social and environmental issues in the new realignment is unclear, but things aren't looking good. It is expected that Safeguards will become a separate unit; its relevance will then hinge on the degree this unit is able to penetrate the programming process. The implications of the restructuring on the institution's two major regional infrastructure initiatives, IIRSA and Plan Puebla Panama, is unclear.
Moving forward:
The IDB Board officially approved an outline for reorganization at its December 14, 2006 meeting. President Moreno seems to be holding his cards tightly, and the reorganization is being directed by a small team under his control. Moreno is expected to crystallize the details of his plan in the coming weeks, and will be prepared to speak with the Governors at the IDB Annual Meeting March 16-20 in Guatemala. Once the full reorganization plan is presented, implementation is expected to take up to two years.
The Civil Society Consultation in Costa Rica on February 7 is an important moment for the public to raise concerns and offer proposals. President Moreno is expected to be present to answer public questions for at least several hours.
Read the complete article on the BIC website: /en/Article.3096.aspx
The Aid Effectiveness Debate. A new World Bank paper reviews the connections between aid flows and development outcomes, arguing that simple cause and effect links are hard to identify.
World Economic Forum Meeting in Davos wraps up. This year’s World Economic Forum in Davos, Switzerland ended on January 28, 2007 amidst debate around climate change, private sector led development initiatives and anti-corruption partnerships. In addition to the usual collection of corporate CEOs and politicians there were a large number of technology specialists and energy and climate experts in attendance.
Inter-American Development Bank Annual Meetings. IDB. March 14-20, 2007. Guatemala City, Guatemala. The official agenda is not yet known, but participants are speculating that the hot issues at the 2007 Annual Meeting will be announcements about the heralded IDB realignment, Camisea, and HIPC debt relief.
IMF/World Bank Spring Meetings. April 14-15. Washington, DC. www.worldbank.org
Asian Development Bank (ABD) Annual Meetings. May 4-7, 2007. Kyoto, Japan.
African Development Bank (AfDB) Annual Meetings. May 11-18. Shanghai, China.
European Bank for Reconstruction and Development Annual Meetings. May 20-21. Kazan, Russia.
Training Programme: Making the PRSP Work: Opportunities and Challenges for Development Actors. The Institute of Development Policy and Management will host the program from April 16-May 18, 2007. Sponsored by the Belgian government, the training targets senior staff from civil society organizations, government officials and local experts working for the donor community in low-income countries. More information:
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