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IDA 17: Back to big infrastructure, flirting with climate finance

News|Bretton Woods Project|8 April 2013|update 85|url
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While donors and the World Bank focus on IDA (International Development Association) structural reform, the proposed IDA shift towards financing infrastructure and climate adaptation raises concerns over development impacts.

March saw the commencement of formal negotiations on the 17th replenishment round of the IDA, the process by which donor countries decide on their financial contributions to the Bank's concessional lending and grant fund for the period 2014-2017. The process takes place every three years and allows IDA to make cheap loans and grants to low-income countries (see Update 69, 55).

The replenishment negotiations, which will run from March to December 2013, provide an opportunity for donors to influence Bank themes, areas of activity and lending conditions. The IDA 17 time period is of particular significance as within it fall both the target date for achievement of the Millennium Development Goals and the launch of the post-2015 development agenda (see Update 83).

In November 2012, the mid-term review of IDA 16 dissected performance so far. IDA donor and borrower representatives discussed the overarching theme of IDA 16, changes to the results measurement system and progress on the special themes of gender, climate change, fragile states and crisis response. The meeting proposed that of the unused crisis response window (CRW) resources, $473 million will be used on regional projects and the remaining $555 million would be kept in the CRW to meet potential crises-related needs for the remainder of IDA 16 and if unused carry over into IDA 17.

Unfinished business

Shortcomings with regards to gender, a special theme proposed to be carried forward to IDA 17 because of lack of progress, are corroborated in a Gender Action working paper, Assessing the effectiveness of World Bank investments, published in March. In the paper, Gender Action's Claire Lauterbach and Elaine Zuckerman evaluate the extent to which the World Bank integrates gender concerns in three sectors: agriculture and rural development; sexual and reproductive health and HIV/AIDS; and conflict prevention and post-conflict reconstruction; and in several policy and strategy mechanisms. The paper from the US NGO concludes that the Bank still only superficially includes women's concerns in its investments and policy and strategy mechanisms. It provides recommendations for making Bank investments and policy and strategy mechanisms responsive to women's needs and rights.

The study suggests that even when jobs are created, Bank funded projects have an inordinately negative impact on women. Gender Action's Elaine Zuckerman, speaking to the Inter Press Service in March, said "our studies found a very specific pattern surrounding these projects: almost 100 percent of jobs went to men, not only in building the coal plants and mines but even office jobs, while women lost jobs."

The chairperson's summary of the IDA 16 mid-term review concluded that "large gaps remain between the scale of development assistance needed to support climate change adaptation and mitigation efforts and the available resources". Meeting participants "encouraged the Bank to develop new climate change related indicators" though at the same time cautioning "against an overlap between IDA and other institutions, such as the Green Climate Fund and the Climate Investment Funds." However, a requested paper on how IDA fits with the wider climate finance architecture is yet to be published. The Bank has proposed making climate change a special theme again for IDA 17.

Prioritising big infrastructure

The first IDA 17 meeting, in mid March, proposed "maximising development impact" as an overarching theme and on top of the two unresolved themes from IDA 16, gender and climate change, proposed adding: inclusive growth and regional transformative initiatives; both to be pursued in the context of private sector development. Inclusive growth will focus on labour, natural resource wealth and financial inclusion, whilst transformational projects will place an emphasis on infrastructure projects with regional developmental impacts. The Bank justified the approach by stating: "The focus on regional transformational projects arises from the recognition that they have the potential to catalyse very large-scale benefits to improve access to infrastructure services beyond borders and promote joint action to tackle shared challenges".

These transformational projects led Peter Bosshard, of US NGO International Rivers, to worry that the Bank is once again courting large-scale infrastructure as a "silver bullet that, in one fell swoop, would allow them to modernise economies". They have also reignited criticisms of the negative development impacts of private sector investment through public private partnerships (PPP) in developing countries. In August 2012, criticisms of private sector investment by India's National Alliance of People's Movements were vindicated in a report by the Comptroller and Auditor General, India's government auditor, that supported claims PPP led to "profiteering at the cost of public resources".

In the lead up to the IDA 17 meeting, a joint letter by six US think tanks and NGOs urged the US government not to support the Bank in its current focus on large-scale infrastructure. They recommended "that IDA members drop the special theme of regional transformational initiatives, and that IDA shifts its focus on infrastructure [to] solutions that are more effective at addressing the energy needs of the poor and at fostering inclusive growth, gender equality and climate resilience."

IDA structural reform

Much of the official negotiating agenda is focused on retooling IDA given changing economic conditions. Proposals have been made to provide transitional support for borrowers 'graduating' from IDA. The IDA 17 paper, Graduation and transitional support, notes that the Bank expects that Angola, Armenia, Bosnia and Herzegovina, Georgia and India will no longer qualify at the end of IDA 16. Currently, graduation can prove problematic and "adversely impact a country's capacity to maintain development momentum if it leads to a significant lessening of available financing for that country." To ameliorate this, the Bank proposes that "the size of transitional support to an eligible country be lower than the support it would have received had it remained an IDA borrower, but still significant." The suggested proportion is two-thirds of its IDA lending.

In addition, they propose introducing three criteria for graduation to be met before the provision of support: gross national income per capita below the historical threshold at the time of graduation; a significant poverty agenda; and prospective reduction in available financing from the Bank after graduation. A Bank taskforce is to be created to provide advice to countries in their move toward IBRD-only (International Bank for Reconstruction and Development, the Bank's middle income country lending arm) status.

The paper on IDA's support to fragile and conflict-affected states (FCCs, countries affected by conflict) referenced the 2011 Word Development Report (see Update 77) which said that the slow development of most of these countries calls for a paradigm shift in the way assistance is delivered. A briefing by US think tank Center for Global Development published in March shares the concern that "with the prospective graduation of better-performing countries, FCCs are likely to constitute a larger share of IDA's clients in the future", hence the debate over how best to support them. It proposes a results-based approach to the IDA support to fragile states, through supplementing country-level performance-based allocation with results-based allocation. Fragile states are currently penalised in the IDA allocation formula because of their low administration capacity (see Update 78). The Bank has developed a revised allocation framework for fragile states for implementation in IDA 17 resting on two components: providing exceptional support to countries facing "turn-around" situations; and increasing poverty-orientation of the regular performance-based allocation system, in addition to ensuring adequate funding for country level engagement. In its current form, change to the allocation rules would lead to more money being directed towards fragile states at the expense of non-fragile states. The Bank predicts that the "implantation of the proposed framework could significantly increase IDA's financial support to [fragile and conflict affected states]" raising the its during IDA 17 from 12 to 18-21 per cent.

Health

Missing from the current IDA 17 themes is the issue of Universal Health Coverage (UHC). In January, Oxfam, in a letter to donor country governments requested that they use the IDA 17 process "to make universal access to health care a reality for all." This follows an open letter on the concept of UHC for all, signed by over 100 civil society organisations and presented to Bank President Kim at the 2012 annual meetings.

Published: 8 April 2013 , last edited: 16 September 2013

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