IFIs in Africa News Briefing

Issue #28

Thursday, January 17, 2008

In this issue:


  • World Bank leak suggests support for Kibaki in disputed Kenyan elections
  • Tanzania is awarded nearly $8 million in dispute over failed water privatization
  • World Bank, EIB to release funds for Bujagali Dam as investigations into safeguard violations continue
  • World Bank reiterates intentions to collaborate with China in Africa
  • EPA deadline passes with many issues unresolved
  • NGOs in Gabon reinstated after government crackdown
  • IFC to promote private sector for African health care
  • Special Feature: Rebuked by internal investigation, World Bank plans to do more in DRC forest sector, but will it do better?

World Bank leak suggests support for Kibaki in disputed Kenyan elections

The Financial Times (FT) reported last week that it obtained a leaked copy of an internal World Bank memo indicating that the Bank accepts the Electoral Commission of Kenya's (ECK) ruling that incumbent President Mwai Kibaki was the victor in the country's presidential elections held last month. The disputed elections have led to widespread unrest in the country and at least six hundred reported deaths.

The memo, written by the Bank's Kenya Country Director Colin Bruce, cites confidential, oral briefings made by UN Development Program (UNDP) officials, who reportedly indicated that Kibaki was in all likelihood the legitimate winner. According to the FT, the UN has "denied that the UN had adopted that position," and adds that it has not "provided any assessment suggesting a Kibaki victory."

International election monitors have raised serious concerns about the legitimacy of the election results.

“There were enough irregularities to call into question the veracity and credibility of the results and it was close enough that nobody can be certain as to who actually won,” Graham Elson, the deputy chief of the European Union observer mission, was quoted by the FT.

The FT suggests that Bruce's memo would be “likely to trigger accusations that the institution, which lends heavily to Kenya, has lost its political objectivity.”

Meanwhile, The Nation reports that talks between the two parties stalled last Friday after the Kibaki government refused to sign an agreement facilitated by the World Bank's Colin Bruce. The government later denied having any knowledge of the document, which the opposition claims had been negotiated by both sides.

Apart from questions about whether the World Bank can be perceived as a neutral broker, the Bank's attempt to intervene in the dispute runs contrary to its policy against interfering in the internal politics of member countries.



Tanzania is awarded nearly $8 million in dispute over failed water privatization

The Guardian reports that an international tribunal threw out a claim by British water company Biwater against the Tanzanian government over a breach of its contract to provide water and sewage services in Tanzania’s capital, Dar es Salaam.

According to The Guardian, a panel in London ordered Biwater to pay nearly $8 million in damages and fees Dawasa, the state water utility in Dar es Salaam. The case was brought under rules of arbitration established by the UN Commission on International Trade Law (UNCITRAL). The panel ruled in Tanzania’s favor after it “found that water and sewerage services had deteriorated” since Biwater took control of the city’s water supply in 2003 in a controversial, non-competitive privatization process backed by the UK government and the World Bank. In 2005, Tanzania cancelled its contract with Biwater after it failed to meet its obligations to provide water to the city.

In a press release produced by the World Development Movement (WDM), policy officer Vicky Conn asserts that “the evidence clearly shows that water privatisation has been a disastrous policy for poor people around the world, but the World Bank insisted on imposing water privatisation in Tanzania in return for much needed debt relief.”

Meanwhile, a separate case arising from the same dispute is still pending at the International Center for Settlement of Investment Disputes (ICSID), an international arbitration body attached to the World Bank. The Guardian reports that Biwater’s suit against Tanzania for the sum of around $20 million will be decided behind closed doors in The Hague, and that a ruling could come within weeks.



World Bank, EIB to release funds for Bujagali Dam as investigations into safeguard violations continue

According to press releases from the World Bank and European Investment Bank (EIB), project sponsors and investors achieved “financial closure” for Uganda’s controversial Bujagali Hydroelectric Project in late December, triggering the release of funds to continue construction on the dam, estimated to cost $800 million.

Meanwhile, pronouncements about the virtues of the project on the Victoria Nile have failed to alleviate persistent concerns over the project’s economic and environmental viability. Observers such as Uganda’s National Association of Professional Environmentalists (NAPE) contend that economic assessments based on the purported capacity of the dam, projected at 250 megawatts (MW) by the project’s sponsors, are unrealistic. Regional droughts and precipitous declines in the levels of Lake Victoria, the river’s source, have led NAPE to suggest that the output of the dam could be closer to 100 MW, making the power far too expensive. Recent studies by independent experts have also added to fears that the dam at Bujagali could slow the recovery of Lake Victoria and jeopardize the survival of fisheries.

Construction of the dam proceeds despite an ongoing investigation into claims presented by civil society groups that the project violates environmental and social standards of both the World Bank and the African Development Bank (AfDB). In July, the AfDB’s Board of Directors authorized a compliance review of the Bank’s investment in the project. The investigation, the first of its kind since the establishment of an Independent Review Mechanism to address citizen complaints, will seek to determine whether the AfDB violated its own policies in approving the projects and, if so, suggest remedial actions. The complaint to the IRM complements a similar investigation being undertaken by the World Bank’s accountability mechanism, the Inspection Panel. A joint team from the two review bodies visited Bujagali in November 2007.

The World Bank Group’s investment includes $360 million in loans and guarantees, while the AfDB and EIB have approved $128 million and $136 million respectively to finance the project and associated transmission lines.



World Bank reiterates intentions to collaborate with China in Africa

The Financial Times (FT) reports that during his recent visit to China, World Bank President Robert Zoellick restated the Bank’s interest in teaming up with the Export-Import Bank of China (China Exim), the country’s official export credit agency, on financing development projects in Africa.

Zoellick appeared keen to assuage concerns expressed by some that China’s massive loan packages to Africa could compromise recent efforts to reduce some African countries’ debt burdens. While the FT reports that Zoellick acknowledged that there was “legitimate concern about building that debt up,” he said China was willing to discuss the issue “because they want to get paid back, too.”

The Bank President also praised China for its decision to contribute for the first time to the World Bank’s concessional lending window for impoverished countries, the International Development Association (IDA).

In May 2007, Reuters reported that the World Bank and the China Exim signed a memorandum of understanding to collaborate on projects in Africa. The Bank indicated that these joint investments would focus primarily on infrastructure lending, namely in the transportation and energy sectors, and that their efforts would initially be concentrated on “sustained-growth” performers such as Ghana, Uganda and Mozambique.

Little is known about the terms of the agreement between the two lenders, as its text was not disclosed. Some observers have speculated that the Bank’s decision to team up with China Exim is part of its strategy to avoid competition with its rapidly growing Chinese counterpart. It is less clear what China Exim’s incentives are for joining hands with the Washington-based Bank.



EPA deadline passes with many issues unresolved

The deadline for the highly controversial Economic Partnership Agreements (EPAs) that the European Union is pursuing in Africa passed on January 1 with just a few countries signed on. The EU had insisted that EPAs should be concluded by the end of 2007, when Europe’s current trade agreements in the region expired.

Only a handful of countries, including Ghana, Cote d’Ivoire, the East African Community, and five countries in southern Africa, have signed onto the free trade agreements with Europe, which critics argue would limit governments’ ability to protect local firms or stipulate certain investment conditions. Most of these agreements were initialed on an interim basis that will allow the free flow of goods, while decisions on the much more contentious topic of liberalized services are expected to be negotiated during 2008. These “competition clauses” have been omitted to date from negotiations at the World Trade Organization (WTO), along with the other “Singapore issues” that Northern countries have been advocating, only to be met with intense resistance from developing countries.

Many critics from within civil society and African governments - the most prominent of whom has been Senegalese President Abdoulaye Wade - have spoken out publicly against the agreements and the inordinate pressure that the EU has put on African governments to sign the deals. Even officials at the World Bank have encouraged the EU to push back its deadline to grant governments additional time to work out the details of the agreements.



NGOs in Gabon reinstated after government crackdown

Civil society organizations in Gabon won a resounding victory this week after the Gabonese Interior Minister was successfully pressured to lift the suspension of twenty Gabonese groups, including members of the Publish What You Pay global coalition that campaigns for the transparent management of oil, gas and mining revenues. The government came under tremendous international pressure for suspending the licenses of NGOs last week after they published a letter critical of the manner in which the government spends its substantial oil revenues, in addition to other complaints regarding poor governance.



IFC to promote private sector for African health care

The International Finance Corporation (IFC), the private sector arm of the World Bank, announced last month that it would coordinate some $1 billion in equity investments and loans to finance private sector health provision in sub-Saharan Africa. The program was explicitly linked to the results of an IFC study, financed by the Bill and Melinda Gates Foundation, which found that the private sector already provides about half of the health care in the region, and that impoverished people are just as likely as the better-off to use private providers.

As a result of the proliferation of “user fees” geared toward cost recovery at public clinics - measures often introduced at the instigation of the World Bank - the difference in cost between public and private services is often limited, and many feel that private providers are better equipped and staffed than their public counterparts, and have shorter waiting times.

However, there remains a longstanding debate about whether institutions such as the World Bank Group should allocate public resources to revitalizing government health sectors, or to encouraging private companies to increase their involvement, with the promise of eventual profits. The intention would be to attract more total resources, and possibly more efficient services, for more people.

But in many cases of privatization of public services, companies have focused their efforts on serving those most able to pay and ended up neglecting the impoverished majority – a phenomenon known as “cherry-picking” (a term also applied to health insurance companies in the U.S.). The IFC, echoing the Gates-funded study, emphasizes the need for strong regulations to safeguard the interests of less wealthy populations. However, few specifics about how such regulatory systems would work are provided. Given the failure of many systems promising to exempt the impoverished from payment, and even the cancellation of privatization contracts (see “Tanzania is awarded nearly $8 million in dispute over failed water privatization” above), many observers are wary of entrusting health care to the good intentions of private companies.

These points are articulated by Barbara Stocking, Director of Oxfam GB, in a letter to the Financial Times. She points to Oxfam’s experience and research and maintains that “profits cannot be made in serving people this poor without some form of public subsidy. Without this, poor people either will not get healthcare at all or will have to pay fees they can ill afford.” Malawi, says Stocking, is an example of one country that has used aid money to hire more health care workers, pay them better, and eliminate user fees. The key, argues Stocking, is to mobilize civil society in developing countries to demand high-quality government regulation and service delivery, and for donor countries to keep their promises to provide more aid.



Special Feature: Rebuked by internal investigation, World Bank plans to do more in DRC forest sector, but will it do better?

Last Thursday, January 10, the World Bank’s Board of Directors discussed the findings of an Inspection Panel investigation into the Bank’s failure to comply with its own safeguard policies in its support for forest sector reforms in the Democratic Republic of Congo (DRC). Although the Board itself issued no formal statement following the meeting, reports indicate that the Executive Directors approved Bank Management’s action plan in response to the Panel’s conclusions, while noting the need for greater specificity regarding lessons learned and next steps, and expressed their support for three new projects worth $64 million currently under preparation. The Board also requested a progress report on implementation of Management’s action plan in one year.

The lesson Bank staff seem to have taken away from the Panel’s investigation is “do more,” but the question is, will they “do better”? Press releases issued by Bank Management following last Thursday’s discussion highlight broad consensus on the need for the Bank to remain engaged in the country’s forest sector, but neglect to mention specifics about what the Bank learned from the oversights and failures documented in the Panel report. Such public relations efforts have been a central component in the Bank’s proactive communication strategy over the past several years, stepped up in response to mounting public concern about its role in the management of DRC’s forests. A closer look at recent press on the case reveals some continued massaging of the facts and suggests a need for a more inclusive dialogue about the Bank’s plans going forward.

Read the full text on BIC’s website.

Note: The text of the IFIs in Africa News Briefing may be freely used providing the source is credited.

The Bank Information Center (BIC) partners with civil society in developing and transition countries to influence the World Bank and other international financial institutions (IFIs) to promote social and economic justice and ecological sustainability. BIC is an independent, non-profit, non-governmental organization that advocates for the protection of rights, participation, transparency, and public accountability in the governance and operations of the World Bank, regional development banks, and IMF.

BIC is supported by private foundations and organizations that work in the fields of environment and development. BIC is not affiliated with any of the Multilateral Development Banks, nor does it receive any funding from them.


You have received this message because you requested email updates from www.bicusa.org.
Click here to manage your newsletter subscriptions
Click here to unsubscribe