+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + BRETTON WOODS UPDATE A bi-monthly digest of information and action on the World Bank & IMF Number 53, November / December 2006 Published by the BRETTON WOODS PROJECT This edition is available on the web at: http://www.brettonwoodsproject.org/update/ A fully-formatted, print-friendly version is available at: http://www.brettonwoodsproject.org/update/53/bwupdt53.pdf + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + 1. Bank, Fund sidestep labour standards: Promote violation of worker's rights 2. World Bank corruption fight drags on 3. Only 22% of IFI info request fulfilled 4. German firn debarred over Lesotho fraud 5. Bank's handling of fragile states "unsatisfactory" 6. Growth commission latest 7. Good governance or bad practices? Two activists reflect on their mistreatment at the World Bank-IMF annual meetings in Singapore. 8. IMF macroeconomic advice: 'thanks but no thanks' 9. IMF quota reform poses risks to developing countries 10. Inside the institutions: The World Bank and disability 11. Split highlights growing call to rethink conditionality 12. World Bank on human rights: "active support" but no politics 13. World Development Report 2007 on youth: familiar prescriptions 14. Global energy solutions bank on carbon trading 15. Uruguay annouces early IMF repayment 16. New senior staff at IMF, BAnk 17. CAO fails to reduce conflict in Peru 18. Uruguay pulp mills: "no risk" 19. Tajikistan negotiating Policy Support Instrument 20. High-risk water infrastructure at any cost 21. Bretton Woods Project faces drop in support. 22. Best Bankspeak and resources from 2006 23. Research, knowledge and the art of 'paradigm maintenance': The World Bank's development economics vice-presidency (DEC) 24. The IFC’s lessons of experience & the Chad-Cameroon oil and pipeline project ===================================================================== 1. Bank, Fund sidestep labour standards: Promote violation of workers’ rights --------------------------------------------------------------------- The World Bank’s 2007 Doing Business Report rewards countries with low levels of labour protection and the IMF’s World Economic Outlook (WEO) urges labour market deregulation. Organised labour, developing country governments and US senators have called for the institutions to respect the standards of the International Labour Organization. Doing Business, released in September, ranks 175 countries on how "business friendly" they are. The annual report, first published in 2003, is used as a guide both for foreign investors and for governments prioritising so-called ‘investment climate reforms’. According to the report, Georgia is the "top reformer", followed by Romania and Mexico. The three "boldest reforms" include Mexico's increase in investor protections, Georgia's flexible labour rules and Serbia's easing of export-import procedures. The most business- friendly economy is Singapore, followed by New Zealand and the United States. The September 2006 WEO reiterated the standard IMF bilateral advice: "ensuring significant structural flexibility, including in labour markets, while establishing effective social safety nets will prove increasingly important". Labour market flexibility refers to reforms to make it easier to hire and fire workers as well as limits on collective bargaining and rights to unionise. The WEO recommended these changes for Japan, the Latin American region, emerging Asian economies, and industrial countries. IMF Article IV consultations, annual country-level reports on the state of the economy, give the same advice, most recently to France, Korea, Serbia and Poland. The International Confederation of Free Trade Unions (ICFTU) has documented how Doing Business has been used by the World Bank and IMF to "force countries to do away with various kinds of workers' protection". For example, a recent Bank economic memorandum to Colombia demanded that the government make hiring and firing decisions more flexible in order to improve its Doing Business ranking. In South Africa, the IMF’s Article IV report recommended "streamlining" hiring and dismissal procedures, which would have required doing away with affirmative action rules that post-apartheid governments put in place in order to correct the legacy of several decades of racial discrimination. Guy Ryder, general secretary of the ICFTU, said "the World Bank and the IMF need to work more closely with trade unions, civil society organisations, and UN bodies such as the ILO to develop policies that support the decent work agenda." A letter in October from six US senators to Bank president Wolfowitz notes that countries with inadequate labour protection are ranked high in Doing Business, contradicting ILO standards. The senators cited Saudi Arabia’s best possible score on the ‘employing workers’ index, despite its prohibitions of freedom of association, the right to organise and collective bargaining, all violations of ILO labour standards. They also "fail to see how praising countries for failing to guarantee a minimum wage and overtime pay lifts people out of poverty" and called on the Bank to coordinate all future public statements regarding labour with the ILO. The senators join calls for Bank and Fund coherence with ILO standards emanating from developing country governments. In her statements at both the spring meetings of the IMF and World Bank in Washington and the annual meetings in Singapore, Felisa Miceli, the Argentine minister for the economy, pressed the institutions to "see compliance with core labour standards not only as ethically imperative but also as necessary to avoid a race to the bottom to attract investment." Miceli continued, "Before advocating for additional labour ‘flexibility’ (frequently just an elegant way of asking for less protection) staff should....consult the ILO." In its analysis of Doing Business, Latin American NGO D3E pointed out that "the way in which companies manage (or not) their social and environmental impact is not taken into account". Author Carolina Villalba concludes that the Bank’s objective is to promote large investments aimed at exporting commodities which create "comparatively few job opportunities but have high social and environmental impacts". Labour market failures? The push for removal of labour protections has been based on empirical studies that link stringent labour market regulation to unemployment. The IMF’s April 2003 WEO said "the causes of high unemployment can be found in labour market institutions." However, this contradicts the findings of the Bank’s World Development Report 2006 (see Update 48), which found that the effect of employment protection legislation on employment is "ambiguous" and that countries should not reduce such legislation without improving social protection and job creation schemes. Aside from the WDR 2006, there have been comprehensive deconstructions of the empirical evidence behind studies which suggest that labour protections create unemployment. These rejections of the conventional wisdom include analysis by US think tanks the Center for Economic Policy Analysis, the Center for Economic and Policy Research and the National Bureau for Economic Research. New research from the Work Foundation, a UK-based non-profit research and consultancy organisation, finds that "the reality is that countries with very different labour markets have performed equally well suggesting that there is no single route to full employment." In comparing the UK with other European countries it finds that deregulation is not the only answer, and that "the combination of moderately tight labour law, strong trade unions and collective bargaining, and relatively generous levels of unemployment benefits is compatible with strong employment performance." In contrast to Bank and Fund policy, the IFC, the independently managed private sector financing wing of the Bank, "recently entered into a partnership with ILO to develop tools to support best practice in global supply chains." President of the Bank Paul Wolfowitz was reported to have met Juan Somavia, director-general of the ILO, during his October trip to European capitals to discuss how the ILO and the World Bank might work together. It is unclear how the ILO will respond to the Bank's overtures. The debate on so-called policy coherence between international financial institutions and the ILO was spawned by the February 2004 World Commission on the Social Dimension of Globalization report, called A Fair Globalization: Creating Opportunities for All. Commissioned by the ILO, it looked at how to deal with the social dimensions of international economic policy. The report stated: "In practice, the multilateral system is underperforming in terms of ensuring coherence among economic, financial, trade, environmental and social policies to promote human development and social progress" and recommended the formation of a global parliamentary group that would integrate oversight of all multilateral agencies. WDR on equity: Practice what you preach http://brettonwoodsproject.org/wdrequity48 Groups attack World Bank standards: Friends of the Earth and Bretton Woods Project Press Release http://brettonwoodsproject.org/platformpr IFC to "consider" inclusion of core labour standards : Immediate implications for support of Haiti free trade zone http://brettonwoodsproject.org/art.shtml?x=19442 Union complaints on Bank labour standards http://brettonwoodsproject.org/1921.html How the World Bank and IMF use the Doing Business Report to promote labour market deregulation, ICFTU http://www.icftu.org/www/PDF/doingbusinessicftuanalysis0606.pdf The World Bank insists on the liberalization of economies, D3E http://www.southdevelopment.org/economy/VillalbaDoingBusiness.pdf Statement by Ms Felisa Miceli of Argentina to the September 2006 IMFC meeting, IMF http://www.imf.org/external/am/2006/imfc/statement/eng/arg.pdf World Economic Outlook, September 2006 , IMF http://www.imf.org/external/pubs/ft/weo/2006/02/index.htm World Economic Outlook, April 2003, IMF http://www.imf.org/external/pubs/ft/weo/2003/01/index.htm Labor Market Institutions and Unemployment: A Critical Assessment of the Cross-Country Evidence CEPA Working Paper 2002-17, Center for Economic Policy Analysis http://www.newschool.edu/cepa/papers/archive/cepa200217.pdf Labor Market Protections and Unemployment: Does the IMF Have a Case?, Center for Economic and Policy Research http://www.cepr.net/publications/IMF_unemployment.htm Labour Market Institutions Without Blinders: The Debate over Flexibility and Labour Market Performan NBER Working Paper No W11286, National Bureau of Economic Research http://www.nber.org/papers/w11286 Who’s Afraid of Labour Market Flexibility?, the Work Foundation http://www.theworkfoundation.com/Assets/PDFs/labour_market%20_flexibi lity.pdf ===================================================================== 2. World Bank corruption fight drags on --------------------------------------------------------------------- The World Bank's anti-corruption framework was the subject of a bruising Development Committee debate at the annual meetings. Further challenges for the Bank include the impact of a rapid rise in Chinese lending to developing countries on anti-corruption efforts, and debt campaigners use of the corruption issue to highlight creditor responsibility for 'illegitimate lending'. The stand-off at the September meeting was between board members led by the US and Japan who support the Bank's anti-corruption framework, and those who feel the framework jeopardises the development mandate of the Bank, including developing countries and several European board members, most notably the UK. There was a six-hour board discussion of the two paragraphs of the final communiqué that referred to the strategy, with the discussion focusing on the extent to which the paper was finalised or still a work in progress. In the end, the block led by the UK gained the upper hand, with the communiqué stressing "the importance of Board oversight of the strategy as it is further developed". At the meetings of the G24 group of developing countries, Mushtaq Khan of the School of Oriental and African Studies in London dissected the Bank's own empirical analysis to refute any causal connection between better scores on corruption indicators and growth. This coincides with the view of the Bank's own evaluation unit which, in a leaked note on the anti-corruption framework, described the link between corruption and country performance as "more varied and diverse". Khan calls for a more nuanced understanding of the "structural drivers" of corruption, the different types of corruption which result and the appropriate policies needed to address them. He fears that the current reform agenda, which sets expectations too high in the battle against corruption, risks "disillusionment and reform fatigue". Civil society groups have been determined to slow the pace of the framework's development (see Update 52). In response, the Bank announced in November a second consultation on the framework running until early January. Bank staff will organise "multi-stakeholder workshops" in "several" countries. A more extensive consultation process was rejected due to the requirement to report to the board in January. Feedback from consultations will go into the January board report which will subsequently feed into a March progress report. This will be reviewed by the board before a final report goes to the Development Committee at the spring meetings in Washington in April. A "global conference" may be organised in early or mid 2007. The Bank's internal work plan is much more extensive, including: systematic consultation with all staff and management; formation of a steering committee to develop options for "country-level engagement"; strengthening of governance units; development of staff guidelines; an independent review of the department of institutional integrity; and the creation of new methodologies for country governance assessments. Faulty measurements? -------------------- All sides agree that the key to rooting out corruption is building better governance institutions; but what institutions and how to measure their effectiveness? Visiting London in October to discuss the Bank's strategy, Daniel Kaufmann, creator of the Bank's governance assessments, said: "The call for additional indicators is fine, but let's not get into the pitfall of not using the good things that exist." However, an OECD report published in August suggests severe problems with the construction and use of the Bank's governance indicators, including correlation errors, lack of comparability over time, sample bias, and insufficient transparency. This may lead the Bank to listen to the "modest proposal" of Cornell University economist Ravi Kanbur to introduce outcomes-based indicators in its governance assessments, a suggestion put forward by the Bretton Woods Project in 2004 (see Update 43). Kanbur argues for the inclusion of a new category of scoring which should evaluate "the evolution of an actual development outcome variable" such as one of the Millennium Development Goal indicators. China crisis ------------ China has reportedly committed $8.1 billion to Sub-Saharan African countries this year compared with $2.3 billion pledged by the Bank. While recipient governments may see Chinese money as a windfall free from the meddling conditions of Western aid agencies, the World Bank has voiced concerns that corrupt regimes may turn to China to avoid facing anti-corruption measures or environmental and social safeguards. Speaking ahead of a China-Africa summit held in Beijing in early November, Bank president Paul Wolfowitz said big Chinese banks "do not respect" the Equator Principles - a voluntary code of conduct pledging that projects financed by private bank lending will meet certain social and environmental standards. He said that though Chinese banks lending in Africa were "relatively new to this kind of activity, they must not make the same mistakes as France and the US did with Mobutu's Zaire." China's foreign ministry spokesman Liu Jianchao shot back, "in fact, [China's investment] benefits Africa's economic and social development." Wolfowitz also said he was concerned about lending by China, Venezuela, India and others to poor countries that had benefited from debt relief: "There is a real risk of seeing countries which have benefited from debt relief become heavily indebted once more." In Bank parlance, this is called the 'free rider' problem. New Bank policy means that poor countries which are found guilty of borrowing from 'free riding' creditors will be punished by having financing cut or made more expensive. Bank watchers have criticised this approach for punishing poor borrowers while doing nothing to discipline 'opportunistic' lenders. Instead, they say the Bank and donor governments should focus on the systematic shortages in development finance. The 'free rider' problem also exposes the failure of the international community to establish a fair and transparent arbitration procedure for debt workouts. If there was a way for future governments to question the legitimacy of past borrowing, all lenders - including the Chinese - would likely be more prudent. Celine Tan, researcher at Warwick University's Centre for the Study of Globalisation and Regionalisation concludes that the measures proposed by the Bank to deal with the 'free riding' problem "are not only operationally flawed but represent instead new mechanisms to continue binding IDA countries to financing flows - and thereby financial discipline." Illegitimate lenders -------------------- Debt campaigners have maintained that northern donors must accept responsibility where they have knowingly entered into loan arrangements which were used for corrupt or other illegitimate purposes. A breakthrough came in early October when Norway announced the unconditional cancellation of $80 million in "illegitimate debts" owed by Egypt, Ecuador, Peru, Jamaica and Sierra Leone. According to debt campaigning NGO EURODAD, Norway's government has "admitted that it's lending in these particular cases was irresponsible and motivated by domestic concerns, rather than an objective analysis of the development needs of the countries involved". The débacle involves the export of Norwegian ships to developing countries between 1976 and 1980. It exported these ships mainly to secure employment for a domestic ship-building industry in crisis, not because these ships served the development needs of the countries concerned. Debt campaigners will use the Norwegian decision to put pressure on other bilateral and multilateral donors to audit their past lending practices. Norway has established a fund for the Bank to undertake a study of illegitimate debt. Immediately the arguments will be used to put pressure on donors to cancel Liberia's debts. According to Jubilee USA arrears to the World Bank and IMF - made up of lending to the former dictator Samuel Doe - amount to over $1.5 billion. Bank anti-corruption framework: "A lot of rhetoric and arm-waving"? http://brettonwoodsproject.org/corruption52 The World Bank policy scorecard: The new conditionality? http://brettonwoodsproject.org/atissuecpia Strengthening Bank Group engagement in governance and anticorruption, World Bank http://www.worldbank.org/governancefeedback Governance and anti-corruption reforms in developing countries: Policies, evidence and ways forward, G24 http://www.g24.org/khan0906.pdf Uses and abuses of governance indicators, OECD http://www.oecd.org/document/25/0,2340,en_2649_201185_37081881_1_1_1_ 1,00.html Reforming the formula: A proposal for introducing development outcomes in IDA allocation outcomes, Cornell University http://www.arts.cornell.edu/poverty/kanbur/IDAForm.pdf Who’s free riding? A critique of the World Bank approach to non- concessional borrowing in LIC, CSGR http://www2.warwick.ac.uk/fac/soc/csgr/research/workingpapers/2006/wp 20906.pdf Liberia fact sheet, Jubilee USA http://www.jubileeusa.org/take_action/action_of_the_month/Liberia_Fac t_Sheet.pdf ===================================================================== 3. Only 22% of info requests fulfilled --------------------------------------------------------------------- A new study released in October by the Global Transparency Initiative (GTI) undermines IFI claims to increased transparency. Only 22 per cent of requests for information about IFI documents - submitted to both the IFIs and member governments - were satisfactorily responded to. The requests were filed according to a rigorous uniform methodology in Argentina, Bulgaria, Mexico, Slovakia and South Africa. To remedy the situation, the GTI has launched an IFI transparency charter, a statement of the standards to which IFI information disclosure policies should conform and a key advocacy tool for the promotion of more progressive policies. Global Transparency Initiative, GTI http://www.ifitransparency.org ===================================================================== 4. German firm debarred over Lesotho fraud --------------------------------------------------------------------- In November, the Bank debarred German engineering firm Lahmeyer International over bribery convictions in the Lesotho Highlands Water project (see Update 52). Lahmeyer is barred from receiving Bank funds for up to seven years, but could see that verdict reduced by four years "if it proves its corporate behaviour has changed". The decision to debar Lahmeyer for a crime for which it was indicted in 1999 "sends the wrong signal to other corporate bribers" says Patricia Adams of NGO Probe International. "The Bank should have taken swift action and suspended the company's right to do business when they were originally indicted - as is allowed for under the US foreign corrupt practices act." Meanwhile, investigations of the European Anti-Fraud Office (OLAF) into the Lesotho case concluded in October, with three European companies from France, Italy and Germany fined a total of 4.4 million Euros. Time to listen to Lesotho! - The World Bank and its new anti- corruption agenda http://brettonwoodsproject.org/lesotho52 German firm barred by World Bank for bribery in Lesotho project, Odious Debts Online http://www.odiousdebts.org/odiousdebts/index.cfm?DSP= content&ContentID=16566 ===================================================================== 5. Bank’s handling of fragile states "unsatisfactory" --------------------------------------------------------------------- In September the Independent Evaluation Group (IEG) released its review of World Bank support to 'fragile states'. The report gave the Bank a mixed review on its effectiveness, but raised serious questions about both the way the Bank is organised internally to deal with fragile states and the system it uses to allocate resources. Researchers and Bank-watchers question whether the review has gone far enough to examine what causes state 'fragility' and what role Bank-led reforms and projects may play in fostering it. World Bank’s handling of fragile states "unsatisfactory" http://brettonwoodsproject.org/ieglicus Engaging with fragile states An IEG review of World Bank support to low-income countries under stress, IEG http://www.worldbank.org/ieg/licus ===================================================================== 6. Growth commission latest --------------------------------------------------------------------- The workplan of the Bank's independent commission on growth (see Update 51) has now been clarified. Twenty-one country case studies "will discuss individual growth and poverty reduction experiences and analyse how they were or were not achieved". At least 40 background papers are being commissioned examining the impacts on growth of climate change, health, education, gender, infrastructure, governance, equity, urban economic growth, migration, trade in services, etc. Finally, the Bank is in the process of organising regional workshops in Cartagena, Colombia in March and Maputo, Mozambique in April, with final dates to be determined. Commission on growth and development, World Bank http://www.worldbank.org/prem/growthcommission ===================================================================== 7. Good governance or bad practices?: Two activists reflect on their mistreatment at the World Bank-IMF annual meetings in Singapore --------------------------------------------------------------------- The IMF-World Bank annual meetings in Singapore were visible for not addressing IMF governance reform and for the anti-corruption framework proposed by the Bank. Media all around the world not only covered the draconian security measures put in place by Singapore, but also the violation of the civil and political rights of NGOs and social movements' representatives that went there to take part in the meetings. These measures aimed to suffocate the voices of the peoples. Just a few days before the beginning of the parallel meeting - the International People's Forum, in Batam, Indonesia - local police authorities announced on Indonesian television that they would not allow the Forum to be held. Civil society organisations condemned the Indonesian government for repressing the democratic right to express peaceful disapproval over World Bank and IMF policies, and the Singapore government for applying pressure on the Indonesian authorities to cancel the Forum. After intensive media work, the Indonesian authorities reversed their decision. Another clear sign of disrespect of civil and political rights was the Singapore authorities' blacklisting of selected organisations and individuals. The list included delegates accredited to take part in the World Bank and IMF official meetings. The prohibition was partially reversed after broad criticism. But the measure, allowing the entry of 22 of the 27 blacklisted individuals, was too little, too late. Expensive travel plans had already been undone and no reason was given for leaving five individuals on the list. Over 160 civil society groups joined the call for a boycott of the official IMF/World Bank meetings. The call highlighted the responsibility of both institutions for the developments. Unfortunately, more oppressive events were still to come. And my detention and deportation was just a part of them. As part of the ActionAid delegation, I was in transit to Singapore and Batam to voice our views on the IFIs and the impact of their policies on poverty and inequality. Like many other peaceful activists, I was held in customs and taken away for interrogation. My detention extended for more than 30 hours. During this period, I was subjected to intense interrogation and utmost humiliation. All my documents, money, personal belongings and my entire luggage were confiscated. I was fingerprinted and photographed several times. I was kept for more than 20 hours locked in a room under observation where I was not able to turn off the lights or go to the toilet unescorted. I was not allowed to speak to anyone in the same situation as me or to make phone calls. Absolutely no reason was given regarding my detention and deportation by Singaporean authorities, despite requests from the government of Brazil to allow my entry. Many other civil society delegates were also detained for several hours, subjected to repeated interrogation, fingerprinting and searches, but released with written warnings not to participate in any protest. Others like me were deported without explanation. Both cases show a lack of respect for fundamental liberties. Denying entry to civil society representatives violated the terms of the memorandum of understanding that Singapore signed with the global institutions. Nevertheless, no strong measures were taken by IMF and WB representatives. Instead, the IMF's governing body, the International Monetary and Finance Committee, said in their communiqué that they "express their gratitude to the Singapore authorities for the excellent arrangements". In spite of the 'good governance' discourse the World Bank and IMF showed how out of touch they are with the practice of genuine democracy. Maria Clara Couto Soares is ActionAid's head of policy for the Americas Region and a former economic advisor to the Brazilian Ministry of Finance. --------------------------------------------------------------------- To most people who caught the news of the banning of activists from entering Singapore, the week of 14-20 September could have been one of the more eventful in the history of the Bank-Fund meetings. World Bank president Paul Wolfowitz's description of Singapore's actions as "authoritarian" added interest to the whole incident, and highlighted the seeming friction between the Bank's vaunted openness to civil society engagement and the host country's stringent laws on public assembly. I was one of those banned, and eventually un-banned, from entering Singapore that week. I did go to Singapore to be at a press conference with others from the International People's Forum against the IFIs. The inconvenience and the anxiety of being labelled a "security and law and order" consideration, were the thoughts that preoccupied me at the time. Judging from the results of the Bank-Fund meetings, the eventful week was not so eventful after all. The media attention masked the non- event inside the meetings. Developing member countries gained nothing of significance. Realising the limited space Singapore provided for civil society action, many groups (including Focus on the Global South) sought accreditation to the meetings for the first time. We were interested in challenging the Bank and Fund on their policy and practice even in their own space. Ironically, it was precisely the Bank's lack of influence over Singapore that made the banning of accredited participants possible. The initial concerns that preoccupied me were forgotten and were replaced by a series of questions. Was it entirely Singapore's fault, or indeed was it at all? Was the fault of the Bank and Fund limited to the choice of Singapore as a venue? Was it wise to have prioritised challenging the Bank and the Fund inside their space? For me, Singapore crystallised a lot of lessons learned from many years of experience with engagement. Owing to the nature of international institutions, it is imperative that we monitor them, challenge them, protest their policies and practices that have negative impacts - in short, engage. What happened in Singapore underscored how much or how little the possibility is of affecting institutions that are not designed to be responsive to what people like me say. The Bank and the Fund are institutions structured like corporations where the biggest stockholders hold the biggest number of votes. My vote is represented by an executive director, and it is measly compared to the American vote that can veto all of the other votes combined. The relationship between the Bank and Fund and my country is that of creditor-debtor, fraught with uneven balance of power. And while some may say that the Bank and Fund are the institutions most open to civil society participation, it has to be remembered that they were not so before Latin America was de-industrialised, African development practically ground to a halt, and the entire developing world was buried in debt, courtesy of its structural adjustment programmes. In short, civil society was called in after they already made a big mess. The Bank and the Fund profusely thanked Singapore and congratulated it for a job well done in hosting the event, keeping silent about the five people who remained on the Singapore banned list, and quieter still about the many others who were stopped, interrogated and deported. Engagement (perhaps it is high time to find another, more appropriate term) remains the norm. But if engagement favours protest and denouncement, it is because engagers get tired of dancing to bad music too. Jenina Joy Chavez is senior associate at Focus on the Global South, a Bangkok-based regional think tank. Seeking submissions We welcome submissions from representatives of Southern civil society organisations for the "comment" feature. If you are interested in contributing please contact comment@brettonwoodsproject.org. ===================================================================== 8. IMF macroeconomic advice: ‘thanks, but no thanks’ --------------------------------------------------------------------- The IMF’s ability to dictate economic policy to member states is fraying because of lost credibility in the wake of its failures in East Asia, Argentina and Russia (see Updates 8, 10, 28). Smaller developing countries are now joining the larger ones such as Brazil and Indonesia in rejecting the Fund’s interference in their economies. In the midst of Ecuador’s presidential election in October, the IMF reportedly recommended in private that the government accumulate reserves to guard against a drop in the oil price and a possible adverse ruling in an investment arbitration case with a multinational oil company. The September 2006 World Economic Outlook (WEO), a semi- annual IMF report, criticised Ecuador’s energy investment policies. Ecuadorean economy minister Armando Rodas called the WEO "a poor report filled with fallacies". The advice on reserves prompted the minister of foreign affairs Francisco Carrion to state "Ecuador will act according to its own interests rather than upon the recommendations of international institutions." Rodas demanded that the IMF stop "meddling in the legal and internal affairs of Ecuador and respect its sovereignty." One candidate in November’s presidential run-off, Rafael Correa, has flirted with declaring a unilateral moratorium on repayment of Ecuador’s debt to the IMF to free up resources for social programmes. South Africa has also publicly refused the IMF’s advice. The central bank in South Africa has a relatively broad band for its inflation target of three to six per cent. In the Fund’s 2006 Article IV consultation, an annual economic report produced for each Fund member, staff suggested that the bank explicitly target the midpoint of the band. Central bank governor Tito Mboweni rebuffed the IMF and declared that both he and the finance minister Trevor Manuel agreed that the IMF should "avoid anything that would appear to be policy prescriptive for countries which are not borrowing from [it]". Rates, reserves policies in flux -------------------------------- The industrial world, increasingly concerned over China’s trade surplus growth, is pushing for the IMF to increase its surveillance of exchange rate regimes. This has been bolstered by an Independent Evaluation Office report that criticised the Fund's surveillance efforts (see Update 51). One idea floated by US researcher John Williamson, among others, is for the IMF to publish equilibrium exchange rates for each member country regardless of the currency regime in use. It is widely viewed that this suggestion is targeted at China, whose currency is considered undervalued by the United States and Europe. However, an October Fund working paper by Dunaway, Leigh and Li casts doubt on this exercise, concluding that "small changes in model specifications, explanatory variable definitions, and time periods used in estimation can lead to very substantial differences in equilibrium real exchange rate estimates. Thus, such estimates should be treated with great caution." The executive board is still reviewing the IMF’s policy on exchange rate surveillance, which was last revised in 1977, but it is unlikely to reach consensus on this topic. In his statement to the IMFC, Nor Mohammed Yakcop, Malaysia’s finance minister, argued against the review of the policy, saying "we do not support the proposal for the Fund to determine and make public whether a member’s exchange rate is misaligned. It is widely known that the estimation of equilibrium exchange rate levels is highly sensitive to the underlying assumption." Similar resistance was expressed by ministers from Argentina and Nigeria. A recent Fund working paper on the optimal level of foreign exchange reserves by Jeanne and Rancière was unable to account for the enormous build up of dollars in East Asia’s coffers over the last few years. The weakness of the model was its assumption that the sole rationale for holding reserves was to buffer against shocks to growth from sudden stops of capital inflows. It ignored the political and economic risks countries and politicians face in going to the IMF during a crisis. A recent G24 technical paper by Injoo Sohn of Princeton University explained Asian countries’ rationale in developing alternatives to the IMF as a counterweight strategy. "An increasing number of developing countries have questioned the legitimacy and effectiveness of the relatively exclusive decision-making structure of global financial governance, particularly after the 1997-98 Asian financial crisis. East Asia is thus calling for substantial IMF reform at the global level while pursuing new financial multilateralism at the regional level." Imbalances remain Meanwhile global economic imbalances continue to increase with the WEO predicting that "the US current account deficit would rise further - to 6.9 per cent of GDP in 2007 - with large surpluses continuing in Japan, parts of emerging Asia, and oil-exporting countries in the Middle East and elsewhere." The multilateral consultations initiated by the IMF in June (see Update 51) were to help unwind these imbalances, but as of yet have produced no results. The IMF has recommended strengthened policies to ease orderly adjustment, including increasing exchange rate flexibility in China, reducing US fiscal deficits, implementing structural reforms in Europe and Japan, and additional spending by oil exporters. Larry Elliot, business editor at UK newspaper the Guardian, was doubtful of the IMF's ability to convince the major players to take the necessary moves. "Believe it when you see it. In the meantime, the clock is ticking." IMF strategic review: too little, too late?: Fund acquires new powers for multilateral consultation http://brettonwoodsproject.org/imfreview51 Ecuador, elections and the IMF, Choike http://ifis.choike.org/informes/458.html South African reserve bank slams IMF inflation-target suggestion, Mail and Guardian http://www.mg.co.za/articlepage.aspx?area= /breaking_news/breaking_news__business/&articleid=284721 South Africa 2006 Article IV Consultation, IMF http://www.imf.org/external/pubs/ft/scr/2006/cr06327.pdf Revamping the International Monetary System, Institute for International Economics http://www.iie.com/publications/papers/williamson0905imf.pdf Statement by Nor Mohamed Yakcop to the September 2006 IMFC meeting, IMF http://www.imf.org/external/am/2006/imfc/statement/eng/mys.pdf East Asia's Counterweight Strategy: Asian financial cooperation and evolving international monetary , G24 http://www.g24.org/sohn0906.pdf A Fund of optimism that could come crashing down, Guardian http://www.guardian.co.uk/Columnists/Column/0,,1874912,00.html World Economic Outlook, September 2006 , IMF http://www.imf.org/external/pubs/ft/weo/2006/02/index.htm ===================================================================== 9. IMF quota reform poses risks to developing countries --------------------------------------------------------------------- During the annual meetings in Singapore the board of governors of the Fund passed a resolution (see Update 52) that sets in motion a two- year quota reform process which may end up eroding, not enhancing, the voice of developing countries in the institution. The resolution - which included ad hoc quota increases for four countries (China, South Korea, Turkey and Mexico) and commitments to revise the quota formula and increase the level of basic votes - was approved by IMF members accounting for 90.6 per cent of the voting rights. The proposal requests that the executive board put forward concrete proposals for the new quota formula and the size of the basic vote increase before the annual meetings in 2007, and sets hard deadlines of spring 2008 for the quota formula review and fall 2008 for the basic vote agreement. It was reported that 23 countries voted against the measure, including India, Argentina and Brazil. India has been the most vocal critic of the proposed changes, arguing instead for all changes to be adopted together as opposed to stretching the process out over two years. Indian finance minister Palaniappan Chidambaram said, "We were not in favour of any ad hocism including the proposed two-stage process based on a hopelessly flawed formula. We believed that all reforms....new quota formula, realigning country quotas, and increase in basic votes could have been adopted simultaneously as a package." Basic votes inadequate Most developed countries have trumpeted the commitment to "at least a doubling of the ‘basic’ votes". Basic votes, which are allocated to every country and are not tied to the quota formula, have dropped from over 11 per cent of total votes at the time of the Fund’s inception to just 2.1 per cent now. Because developing countries outnumber developed countries in the Fund, increasing basic votes boosts their share of the total vote. However, even a trebling of basic votes, which has been called for by numerous governors in their speeches to the International Monetary and Finance Committee (IMFC), would do little to affect the distribution of power or change decision making procedures. No proposal for changing the basic votes would prevent industrialised economies from maintaining their majority of voting weight. Regressive formula The change in basic votes will be tied to agreement on "a simpler and more transparent" quota formula. The real worry for developing countries is that the new formula will actually lower their share of the total vote. While the factors to be included in a new formula will be the subject of negotiation over the next year, the US, the EU and Japan all agree that GDP at market exchange rates should be the predominant factor. While the US has left room to consider absolute variability of the current account, the EU prefers a formula based on openness to trade. In either formulation, combining a two-factor formula with a trebling of basic votes would actually decrease the voting power of developing countries from their current share of about 30 per cent to ranges of approximately 20 per cent to 25 per cent of the total. While the US has committed to forgoing any quota increase that it may be entitled to under a revised formula, no other developed country has been willing to do the same. In fact, the EU has stated the opposite. In a draft position document leaked to newswire Bloomberg, EU member states refused to swear off increases to their quotas. They have also rejected using current account variability as a factor in a new quota formula. They have also looked to delay quota adjustments from any new quota formula, arguing that adjustments should be drawn out over decades and only in the context of an increase in total quota due to insufficiency of Fund resources. Finally they have rejected any moves to link reform of quotas to reform of the executive board. Board reform off the table -------------------------- While commentators have called for a ‘grand bargain’ on IMF governance reform (See Updates 48, 51), powerful members have resisted anything but the smallest changes to the executive board. The recent quota reform proposal only called for more staff resources and more than one alternate executive director (ED) for large constituencies. These minor changes do not address the imbalance in board representation which sees Europeans hold one-third of board chairs. Europeans have consistently sought to protect their privileges at the IMF, and refused to link board and quota reform. The board also continues to refuse to publish voting records or transcripts of board meetings. The board’s poor functioning and imbalance has prompted the New Rules for Global Finance Coalition to convene a high-level panel on IMF board accountability. The panel - which includes former EDs, academics, IMF officials and representatives from civil society - will publish its recommendations in January. --------------------------------------------------------------------- http://www.new-rules.org/docs/imfreform/imfaccountability100306.htm IMF quota reform is inadequate, reaction to IMFC communiqué http://brettonwoodsproject.org/prquota0609 Tinkering at the edges of governance reform: IMF quota proposals http://brettonwoodsproject.org/IMFquotareform52 UK NGO open statement on governance reform of the IMF http://brettonwoodsproject.org/ukimfreform European CSO open statement on governance reform of the IMF http://brettonwoodsproject.org/euroimfreform IMF strategic review: Reform or be left behind http://brettonwoodsproject.org/imfreview48 IMF Executive Directors and Voting Power, IMF http://www.imf.org/external/np/sec/memdir/eds.htm ===================================================================== 10. Inside the institutions: The World Bank and disability --------------------------------------------------------------------- There are 400 million physically and mentally disabled people living in developing countries, and it is estimated that more than 10 per cent of poor people are disabled. James Wolfensohn, while president of the World Bank, said, "The World Bank considers it crucial that countries adopt development policies that include the concerns and needs of disabled people so that they can contribute to the societies in which they live." The Bank’s formal commitment to disability work began in June 2002 with the founding of the disability and development team within the social protection unit of the human development vice-presidency. The team’s primary focus is on cooperating at the international level on including the disabled in development, but it also assists those who ensure that the Bank’s internal working practices do not prevent disabled staff members from effective participation in the Bank. Currently the disability and development team has five full-time and three part-time staff. Inclusion of the disabled is generally not advanced through dedicated lending projects, but integrated as aspects of other projects, for example ensuring a transit project is accessible to disabled persons. The Bank cites its mainstreaming approach as the reason why it has no figures on the volume of Bank resources dedicated to working with the disabled. However it does estimate that in the last four years four per cent of all Bank projects, representing five per cent of lending volume, have integrated disability as a component of their work. In that time, the disability team has worked with approximately 80 staff in regional, country and sectoral offices. For example, the team worked on a flagship project on the inclusion of disability in development work in India and a system developed in the Latin America and Caribbean region to look for opportunities to enhance the inclusion of disability in upcoming projects. In 2002 and 2004 the World Bank organised conferences on disability and development to mark the UN international day of disabled people. Much of the Bank’s early work in this field involved improving the data available about disability. Nobel-prize winning economist Ama rtya Sen’s speech at the 2004 conference highlighted the efforts that needed to be made to adapt poverty lines to consider the higher incomes needed to achieve the same quality of life by the disabled. The Bank also set up the Global Partnership for Disability and Development (GPDD) in 2004, an international consortium of development agencies, NGOs and governments, and other interested parties. The partnership "accelerate[s] inclusion of people with disabilities and their families into development policies and practices". The GPDD does not engage in field work but seeks to "increase collaboration among development agencies and organisations to reduce the extreme poverty and exclusion" of the disabled. It essentially serves as a clearinghouse for information on disability and its secretariat will be established at the Bank before the end of 2006. The GPDD coordinating task force includes eight representatives from civil society, three Bank staff, two government representatives (from India and Uganda) and one official from the United Nations. The NGOs on the task force include World Vision UK, the African Deaf Union and Handicap International. The World Bank also administers a multi-donor trust fund, established in December 2005, related to disability but its work plan is under construction and it has not yet funded any projects. The trust fund’s main role is to fund the activities of the GPDD. Finland, Italy and Norway sit on the donor committee of the fund, which is expected to disburse $700,000 a year for five years. The Bank also participates in inter-agency cooperation to ensure that the UN Convention on the Rights of Disabled Persons is implemented. Despite this rights-based approach, the Bank’s region and country offices have free reign to develop their own work programmes on disability: "Each region of the Bank has its own approach to disability, mostly depending on the priorities established by each country. The approach depends on cultural, economic and social environments and by the financial situation in the country." The disability and development team developed a toolkit covering knowledge on thematic areas related to disability - for example data collection, disability in the project cycle and disability law. The toolkit served as the guideline for training courses with Bank team leaders in Africa and East Asia to teach them how to include disability in development programmes. The team intends to continue improving the toolkit by updating the existing information and adding additional sectors. The team also engages with country staff and gives advice in the Poverty Reduction and Strategy Paper (PRSP) formation process, most notably in Tanzania, as well as works on the links between disability and other issues that have captured the Bank’s attention in recent years such as water, sanitation, communication and youth. Bank engagement with disabled people’s organisations and civil society at large is done both by the disability team and at country level. Disability and development website, World Bank http://www.worldbank.org/disability Global Partnership on Disability and Development, World Bank http://www.worldbank.org/disability/gpdd ===================================================================== 11. Split highlights growing call to rethink conditionality --------------------------------------------------------------------- Differences of opinion over conditionality blew up into an embarrassing spat between the Bank and the UK at the annual meetings in Singapore, forcing the Bank into a second review of conditionality. Conditionality - stipulating policy changes governments must make in order to receive loans or grants - is common practice at the Bank. As part of its contribution to the last replenishment of the International Development Association (the Bank's lending arm to low- income countries), the UK made £50 million contingent on the Bank making "satisfactory progress" on "implementing the recommendations in the 2005 review of World Bank conditionality" (see Update 47). The review committed the Bank to five 'good practice principles' in the use of conditions: ownership, harmonisation, customisation, criticality, and transparency and predictability. An internal Bank review released in September which found that it is "broadly following" the new principles was contradicted by NGO research (see Update 52) and failed to satisfy the criteria of the UK. Stung by rebukes on both this issue and the anti-corruption framework (see page 2), Bank officials struck back, accusing UK international development secretary Hilary Benn of "manufacturing a non-crisis to score points in the UK by pretending to stand up to the Bank. It plays well in the party leadership race back home but has absolutely nothing to do with helping poor people." Wolfowitz was forced to climb down by the end of September, writing in a letter to the Financial Times that it was "unwise of Bank officials to attribute this campaign to the political ambitions of Hilary Benn", and that it was "right to question past Bank policies regarding conditionality". In late November the Bank released a progress report on implementation of the good practice principles, in response to the UK's concerns. The report contends that the Bank has made "satisfactory progress in implementing the recommendations of the 2005 review of World Bank conditionality". However, in a marked change in tone from the previous progress report, there is an admission that there is considerable room for improvement. Identified areas for improvement include: upstream disclosure of Bank analytic work (such as poverty and social impact assessments) "to give political space for debate"; avoiding the use of policy conditionality in "sensitive areas" where "ownership is uncertain or the political environment fragile"; avoiding overlap of conditionality with the IMF; avoiding unnecessary process conditions and "vague formulations"; and reducing the use of benchmarks ("steps in a reform process that represent progress markers"), especially in low-income countries; However, the Bank was equivocal on the key issue of the link between a country's development plan and the policy conditions included in its lending framework, saying only that "many accountability frameworks are a summary of a variety of policy intentions mentioned throughout government strategy documents". It is anticipated that the progress report will satisfy the board when it is discussed 5 December. The next progress report on conditionality is planned in two year's time. Denunciations of the World Bank's use of conditionality from civil society groups around the world continue unabated. In October for example, a civil society symposium in Sierra Leone called for reform of conditionality policy, while more than 2000 people marched on the offices of the World Bank in Colombo calling for an end to harmful economic policy conditions. The Norwegian government is hosting a conference on conditionality end November which will bring together development officials from Sweden, Denmark, Finland, the UK, Canada, Germany and The Netherlands to discuss more appropriate and effective conditionality for the future. As input to the conference, the Norwegian ministry of foreign affairs commissioned research on the impact of conditions. Case study countries are Bangladesh, Mozambique, Zambia and Uganda. Preliminary findings include: the Bank is significantly more pragmatic than it used to be, although it is still exploring ways to increase private participation in the provision of services; privatisation conditionality still figures in a majority of the IMF's Poverty Reduction and Growth Facilities; in trade, the basic thrust towards liberalisation continues, with changes due to the shifting global context as well as prior liberalisation at the country level; and there is a great deal of variation in Bank and Fund practice, from outright pressure to privatise through the use of conditions to a case where no pressure was observed. UK cuts through World Bank spin on conditionality http://brettonwoodsproject.org/ukwbcondreview47 Night and day: reviews highlight contrary views on World Bank use of conditionality http://brettonwoodsproject.org/conditionality52 World Bank no more!, MONLAR http://www.geocities.com/monlarslk/events/docs/Reject_WB_dictates.pdf Norwegian Church Aid, NCA http://english.nca.no/ ===================================================================== 12. World Bank on human rights: "active support" but no politics --------------------------------------------------------------------- In October the Swedish minister of foreign affairs launched a Nordic trust fund for justice and human rights, and the World Bank Institute devoted its latest edition of Development Outreach, to human rights and development. This includes contributions from high profile experts on the issue and from the Bank's new legal counsel, Ana Palacio. Meanwhile, the World Bank's private sector arm, the International Finance Corporation (IFC) continues to pioneer its niche private sector role in supporting human rights. The five year Nordic trust fund will finance: training for World Bank staff; pilot projects linked to poverty reduction strategy papers; and development indicators for "efficient" human rights and justice programmes. Ulrika Sundberg from the Swedish ministry of foreign affairs states that there is a lack of practical evidence to show that human rights considerations "constitute an added value to the economic development process" and that World Bank economists need convincing of this fact. She envisages a debate on conditionality "for decisions on the granting of loans or aid to be subject to tangible results in the area of human rights". She also asserts that "the World Bank should not take over the UN's role when it comes to human rights". Ana Palacio emphasises that "the World Bank has limitations on strictly political activities", based on its articles of agreement. She asserts that "the overarching goal of human rights frameworks is the empowerment of the weakest most marginalised, including the poor". She puts much emphasis on the World Bank's "facilitative role", to support country members to realise their human rights obligations. Importantly she states that "human rights would not be the basis for an increase in Bank conditionalities, nor should they be seen as an agenda that could present an obstacle for disbursement or increase the cost of doing business". She also highlights the integration of human rights with the Bank's promotion of good governance and anti-corruption work. She makes no mention of the Bank's own role in contributing to violations in recipient countries and ways in which it should address this, or access to justice for those affected. Reactions to Palacio's statement have been mixed. "Although her focus is largely limited to economic, social and cultural rights, she has at least emphasised legal empowerment of the poor as an important consideration", said Anne Perrault from the Center for International Environmental Law. "We should watch to see if the Bank' focus, in practice, remains entirely on what states are obligated to do and not on what the World Bank must do". Others fear that the Bank will use its newly adopted human rights speak as a means to legitimise its good governance and anti-corruption agenda, and that efforts to "support its members to fulfil their obligations" will result in yet more loan conditionality (see Update 52). The IFC claims to be "actively supporting" the operationalisation of the UN Norms on Business and Human Rights into private sector lending requirements and asserts that its "policy and performance standards are supportive of human rights". Responding to a report edited by Canadian NGO, The Halifax Initiative (see Update 51) on the IFC's revision of its lending standards, the IFC says it is "trying to strengthen [its] support of human rights at the project level", particularly in relation to its lending standards on labour, security forces, housing and indigenous peoples. Fraser Reilly-King from The Halifax Initiative said: "such an assertion is astonishing when you look at IFC-supported projects associated with clear human rights violations, such as the Glamis goldmine in Guatemala and Anvil copper-sliver mine in the Congo. If the IFC were to ensure that its standards comply with international law and that its projects do not undermine human rights directly or indirectly as called for by the Extractive Industries Review, that would be a different matter." The IFC will launch its human rights impact assessment in December (see Update 52) Alfredo Sfeir Younis, the World Bank's former 'special advisor on the social dimensions of globalisation' has also contributed to the debate. Writing in the online magazine Policy Innovations he outlines that human rights must be a consideration for economic development organisations. Sfeir Younis' vision takes the legal concept of human rights into the realm of economic markets, stating that human rights are "highly correlated with economic development and are often precursors for it". He believes that "economic development institutions are best positioned to make human rights a reality" and sees a fundamental role for the private sector in their fulfilment. Righting the Bank’s agenda http://brettonwoodsproject.org/humanrights51 Justice or conditionality by another name? World Bank at the Human Rights Council http://brettonwoodsproject.org/humanrights52 Nordic trust fund on human rights, Swedish ministry of foreign affairs http://www.manskligarattigheter.gov.se/extra/pod/?id= 44&module_instance=2&action=pod_show&navid=44 "Development outreach" on human rights, World Bank Institute http://www1.worldbank.org/devoutreach/#6 IFC response on human rights, The Halifax Initiative http://www.halifaxinitiative.org/index.php/projects/821 ===================================================================== 13. World Development Report 2007 on youth: familiar prescriptions --------------------------------------------------------------------- The World Bank's flagship annual report, the World Development Report (WDR) was released in September, focusing on youth. Plans are already underway for next year's edition on agriculture, and follow-up continues on last year's report on equity. The authors of the youth report apply 'three lenses' to improve the focus of youth policy development: expanding opportunities; enhancing capabilities; and giving second chances. Despite bringing much needed attention to the issue of youth and development, NGOs have found many familiar Bank prescriptions in the report. NGOs working on youth issues have welcomed the report's attention to 'second chances', however PLAN International believes insufficient attention is directed to confronting the structural factors that generate 'inequalities of opportunity' in the first place: "the negative impact of exclusionary structures, political processes, policies and institutions is overly played down." Willy Thys, general secretary of the World Confederation of Labour, also slated the report: "It is indeed the Bank's own standard policies and conditionalities - government austerity, deregulation, privatisation and liberalisation - that has created many of the problems the report tries to address, such as growing poverty among young people and the fact that a majority of youth, particularly young women, only can find work in the informal economy". David Archer, head of education for ActionAid International finds the report has "ideological attachments" in education. He cites the report's support for school vouchers, performance-based pay for teachers, public-private partnerships and cost sharing as examples where ideology triumphs evidence. WDR 08 on agriculture --------------------- The WDR in 1982 addressed the role of agriculture for development. Twenty-five years later the share of rural poverty in total poverty has remained at approximately 70 per cent worldwide. This fact, combined with "dramatic changes" in agricultural markets and technologies, is cited as the main reason to undertake a second WDR on agriculture. The eleven person WDR team will be led by Derek Byerlee, an Australian working with the Bank's agriculture and rural development department, and Alain de Janvry, a French national who is professor of agricultural economics at the University of California at Berkeley. The report outline covers three parts: investing in agriculture for growth, making agricultural growth pro-poor, and integrating agriculture-for-development into national and global policy agendas. The report outline sends out encouraging signals about a number of key issues that will be addressed in the report, including environmental degradation, the role of indigenous knowledge, and the impacts of market concentration. Undoubtedly controversial will be the stances taken on issues such as biotechnology, land reform, subsidies and the impacts of trade liberalisation. In the past months, consultations have been held in France, Australia, Germany, Sweden, Canada and the US. An electronic consultation on the first draft of the report is scheduled for January-February. The final report will be published in September 2007. The timing of the final report will coincide closely with that of the International Assessment of Agricultural Science and Technology for Development (IAASTD). The purpose of IAASTD is to assess agricultural knowledge, science and technology in order to "more effectively to reduce hunger and poverty, improve rural livelihoods, and facilitate equitable, environmentally, socially and economically sustainable development". The Bank co-sponsors the IAASTD along with several UN agencies. Follow-up on WDR equity ----------------------- Last year's WDR on equity found that rising global inequity is a bad thing for both the intrinsic unjustness it represents and because of the instrumental relationship between equity and development. Sweden's development agency has provided funds to support the operationalisation of the report. Support is being provided to a small number of country teams where there is interest in equity issues including Cambodia, Chile, Kenya, Uganda and Zambia. Cambodia: Working on a concept note for a report on equity and development to be presented at the next Consultative Group meeting Chile: The government has asked the Bank to work on assessing the impact of programmes/projects as well as institutions. The Bank is currently working on quality of education and decentralisation. Work on measuring inequality of opportunities may be carried out by the UN Development Programme. Kenya: Progress has been made on the 'Justice for the Poor' programme: qualitative work will be conducted in the spring in the arid and semi-arid lands districts focusing on disputes and conflicts over natural resources and over community funds. Uganda: Inequality trends are being examined and comparative work undertaken on Mozambique. This may form the basis for a wider study on distribution dynamics in Africa. Zambia: A group of partners led by the Economic Association of Zambia has prepared a programme of seminars on equity and development, with the objective of involving key policymakers in a discussion on key aspects of equity in Zambia. The series will be launched on December 13 with a discussion of the main themes of the WDR 2006 and their relevance to Zambia. Other activities ---------------- Mexico: The Mexico country office is organizing a high-level conference on 'Equity and competition for high growth in Mexico' in Mexico City 27-28 November. Latin America region: A regional study on inequality of opportunities is being launched. African region: Trends in inequality in several Sub-Saharan African countries are being examined. This work has started with a review of existing data and would build on the results of the comparative study of Uganda and Mozambique. Multi-donor growth diagnostic facility: Discussions between the Bank and donors have progressed on a facility that would provide funds for country-level work on constraints to more equitable growth. In parallel with the country pilots, a research programme is being fleshed out. The first area, entitled Describing inequity: building the foundations for better poverty and inequality data, focuses on improving abilities to measure inequality. The second research area, entitled Investing in equity: understanding and breaking poverty and inequality traps, includes work on "the nature of the relationship between income levels and health and education outcomes, and on geographic poverty traps and the links with infrastructure quality and migration". Since Francisco Ferriera, head of the WDR equity team returned to his responsibilities in the research department, the director for development policy, Alan Gelb, has taken over leadership of the equity and development working group. For more information on these activities, contact Giovanna Prennushi, gprennushi@worldbank.org. Bank on agricultural trade: export strategy "impoverishing" http://brettonwoodsproject.org/wbagtradereport World Development Reports, World Bank http://www.worldbank.org/wdr Bringing equity into development World Bank board note 28 June 2006, World Bank http://www.ifiwatchnet.org Agricultural assessment watch http://www.agassessment-watch.org ===================================================================== 14. Global energy solutions bank on carbon trading --------------------------------------------------------------------- In the midst of climate talks in Nairobi and the release of the Stern review on the potential catastrophic economic impacts of climate change, the World Bank has been touting the most recent draft of its investment framework on clean energy and development, and stepping up its role in devising market-based solutions to climate change. Critics have decried the hypocrisy of the Bank's role in funding fossil fuel projects, and the perverse rationale behind carbon trading. The latest draft of the World Bank's investment framework for clean energy and development was published at the World Bank/IMF annual meetings in Singapore in September (see Update 51). The framework now includes an "Africa action plan for improved energy access" and is based on three 'pillars': energy for development and access for the poor; transition to a low carbon economy; and adaptation to climate change. It encourages a cost-effective and "sustainable" transition to a low- carbon economy, "without hindering the growth of developing countries and mitigating the incremental costs to them". Emphasising the need to broaden "energy sector policy reform to attract private sector investments and additional public sector financing", it also calls for additional concessional support for energy needs in Sub-Saharan Africa. It proposes new financial instruments, notably the clean energy financing vehicle and the clean energy support fund; makes suggestions for the role of the Global Environment Facility (GEF); and advocates for "sound country energy policies" and "regulatory frameworks." Many criticisms of the first draft of this report published in April still stand, including the Bank's promotion of large hydropower, nuclear and coal-fired power projects as 'clean' alternatives, and the failure to challenge the responsibility of northern polluters. A coalition of NGOs, including the Bretton Woods Project elaborated these issues in a report entitled How the World Bank's energy framework sells the climate and poor people short . It points out that despite laudable statements on energy poverty, and the adverse effects that climate change can have on poor peoples' livelihoods and development aid, the new framework is still fundamentally flawed. The report urges the Bank to redirect dirty energy financing to renewable technologies and energy efficiency projects via an appropriate multi- lateral framework. Pantoro Tri Kuswar of Friends of the Earth Indonesia/WALHI said "the Bank's focus on fossil fuel projects will not bring electricity to the poor but instead lead to more pollution, conflict and corruption and do little to stop climate change". Reliable and comparable data on World Bank energy spending is elusive. According to New Renewable Energy & Energy Efficiency: World Bank Group Exceeds Previous Year's Commitments By 48 Percent, the World Bank says that it financed $ 871 million in renewable energy and energy efficiency in fiscal year 2006. A recent analysis by Friends of the Earth pulls this claim apart. Not only do these figures include environmentally damaging large hydropower projects but also projects funded by the GEF or by carbon finance funds, which are technically separate from the World Bank. Of the $ 4.4 billion that the Bank claims for all of its energy sector investments in fiscal year 2006, only four per cent actually went to renewable energy projects like wind, solar, and geothermal production. More than 82 per cent of World Bank financing for oil extraction has gone to projects that export oil back to wealthy northern countries. "World Bank investments are a mere drop in the ocean compared to what is needed to promote renewable energy and energy efficiency in developing countries" said Elizabeth Bast. Trade yourself neutral ---------------------- The World Bank is the largest public broker of carbon purchases. Its investment framework places considerable emphasis on market solutions. The Bank and IMF proudly announced that their annual meetings were 'carbon neutral'. The assumption that the problem of climate change can be traded away, while maintaining the economic status quo is undermined in a recent book edited by Larry Lohmann called Carbon trading: a critical conversation on climate change, privatisation and power. It demonstrates how current carbon-trading policies "favour the further exploitation of fossil fuels, and also create and perpetuate social inequalities". The book points out that despite the World Bank's involvement in carbon trading initiatives such as the Clean Development Mechanism and Prototype Carbon Fund (see Update 47), from 1992 through 2004 it approved $11 billion in financing for 128 fossil-fuel extraction projects in 45 countries. These projects will ultimately lead to more than 43 billion tonnes of carbon-dioxide emissions, "a figure hundreds of times more than the emissions reductions that signatories to the Kyoto Protocol are required to make between 1990 and 2012". Ditch Dirty Development ----------------------- A campaign recently launched by the UK student network People & Planet challenges the contradiction between UK government targets to tackle climate change by cutting greenhouse gas emissions, and the continued use of UK development aid- earmarked for poverty reduction- to support fossil fuel extraction projects that generate energy for consumption in the north. DFID's White Paper states that "climate change poses the most serious long term threat to development and the MDGs", yet it continues to contribute to climate change through multilateral funding for oil and gas extraction projects, opposed the phase out of World Bank investment in oil extraction as recommended by the Extractive Industries Review, and does not monitor the impact of its funding on the climate. People & Planet are calling on DFID to phase out all support for fossil fuel extractive projects, and massively increase support for new renewable energy sources to address the growing energy needs of emerging and developing economies without concurrent increases in carbon emissions. "Spending development aid on fossil fuel projects is completely at odds with the poverty alleviation mandate of DFID and the World Bank," said campaigner Bronwen Thomas. An international campaign called "end oil aid" has also been set up recently, to address the issues at the intersection of oil dependence, climate change, and international debt. ‘Cleaning’ energy: Ambiguous framework proposes coal and large hydro http://brettonwoodsproject.org/climate51 World Bank energy framework sells climate and poor people short, IFIwatchnet http://www.ifiwatchnet.org/documents/item.shtml?x=46133 Carbon trading: A critical conversation on climate change, privatisation and power , Transnational Institute http://www.tni.org/ctw-docs/ddcarbontradepress.htm Ditch dirty development, People & Planet http://peopleandplanet.org/ditchdirtydevelopment End oil aid, End oil aid http://www.endoilaid.org ===================================================================== 15. Uruguay announces early IMF repayment --------------------------------------------------------------------- In November Uruguay committed to clearing its balances with the IMF earlier than required, announcing its intention to repay its remaining balance of $1.1 billion sometime next year. The remaining debt was not due to be repaid until 2008. This follows two other early repayments, made in March and July. Uruguayan economy minister Danilo Astori said that the decision marked the beginning of a new phase in his country's relationship with the IMF. The repayments will likely be financed by new sovereign bond issues. The IMF welcomed both the early repayment announcement by Uruguay and the completed early repayment by Indonesia. ===================================================================== 16. New senior staff at IMF, Bank --------------------------------------------------------------------- One week after Agustín Carstens resigned as the IMF deputy managing director, managing director Rodrigo de Rato selected the deputy finance minister of Brazil, Murilo Portugal, to succeed him. Portugal?s appointment, revealed 23 October, brings him back to Washington where he served four years as an executive director at the World Bank and seven years as an ED at the Fund. Though currently sitting in leftist president Luiz Inácio Lula da Silva?s cabinet, Portugal was also secretary of the treasury during the centrist presidency of Fernando Cardoso and has served on the board of Banco do Brasil. He has degrees in law and economics, including from Cambridge University. Carstens has joined the transition team of Mexico's newly elected president Felipe Calderon, and is tipped to be selected as finance minister Kristalina Georgieva will serve as director for strategy and operations in the Bank’s sustainable development vice-presidency. The position was created in June by Bank president Paul Wolfowitz following the merger of the environmentally and socially sustainable development and the infrastructure networks. Georgieva is currently the World Bank’s country director for Russia. IMF Managing Director de Rato Proposes Appointment of Murilo Portugal as Deputy Managing Director, IMF http://www.imf.org/external/np/sec/pr/2006/pr06226.htm ===================================================================== 17. CAO fails to reduce conflict in Peru --------------------------------------------------------------------- A report by Friends of the Earth finds that the 'roundtable dialogue' set up by the World Bank's Compliance Advisor Ombudsman (CAO) has been unable to fulfil its objectives to intervene effectively in conflicts between the IFC-supported Yanacocha mine company (see Updates 42, 53) and affected communities in Cajamarca, Peru. Local groups have asked for the roundtable's dissolution on the grounds that it lacks independence and has been manipulated by mining company interests. The independence of the CAO was immediately doubted due to its association with the IFC and the mining company. The CAO in Peru: Lessons learned from dialogue as a strategy to reduce conflict, Friends of the Earth http://www.foei.org/publications/pdfs/cao_cajamarca.pdf ===================================================================== 18. Uruguay pulp mills: "no risk" --------------------------------------------------------------------- The IFC and MIGA have approved funding for a controversial pulp mill project in Uruguay. This follows an IFC-commissioned impact assessment which found few environmental and social risks. The project is being built by by Finland's Botnia in the town of Fray Bentos on the Uruguay River dividing Uruguay from Argentina. Funding for a second project by Spain?s ENCE is on hold since its announcement to relocate its plant elsewhere. In July the International Court of Justice (ICJ) in The Hague rejected the Argentine request to order Uruguay to suspend construction of the two mills. An ICJ judgement on whether Uruguay has breached the 1975 river treaty, under which all matters regarding the water in the river must be agreed to by both countries, is expected within two years. Major blockades by local activists on the Argentine side have resumed. Bank stumped on Uruguayan paper mills http://brettonwoodsproject.org/botnia-ence51 ===================================================================== 19. Tajikistan negotiating Policy Support Instrument --------------------------------------------------------------------- The IMF resident representative to Tajikistan, Luc Moers, issued a statement in November indicating that the country's government had chosen "to work towards a programme under the Policy Support Instrument". This would make Tajikstan the fourth country to opt for a PSI, a non-lending facility of the IMF that operates like a Poverty Reduction and Growth Facility loan in terms of the conditions attached, but does not provide any actual resources. Tajikstan's second PRGF programme concluded in February with a positive IMF assessment of the country's performance. Other PSI countries are Cape Verde, Uganda and Nigeria. Policy support instrument: Helping hand or more thumb screws? http://brettonwoodsproject.org/psi48 Cape Verde becomes IMF’s third PSI country http://brettonwoodsproject.org/capeverde52 IMF working with Tajik authorities towards program under Policy Support Instrument, IMF http://www.imf.org/external/np/sec/pr/2006/pr06249.htm ===================================================================== 20. High-risk water infrastructure at any cost --------------------------------------------------------------------- After a decline in the late 90s, World Bank lending for water projects has been rapidly increasing over recent years, reaching $1.8 billion in FY05, and is set to continue. The Bank is the largest external financier in this sector. At the world water forum in Mexico in March, Kathy Sierra, vice president for infrastructure said that the Bank had "learnt from past mistakes and has been supporting...socially and environmentally sound infrastructure". Projects in South Asia and sub-Saharan Africa suggest otherwise. Projects in South Asia and Sub-Saharan Africa suggest otherwise. Pakistan reparations -------------------- A recent investigation by the World Bank Inspection Panel has found that the World Bank-funded water projects in Pakistan, the National Drainage Program (NDP) and Left Bank Outfall Drainage project (see Update 52) have led to widespread environmental harm and suffering among local communities. The projects have contributed to deadly floods, and violate- either fully or partially- six of the Bank's safeguard policies on environmental assessment, natural habitats, indigenous peoples, involuntary resettlement, project supervision and disclosure of information. The World Bank approved $285 million for the NDP in 1997. The project was supposed to improve drainage in Pakistan's irrigation system in order to address salinisation and waterlogging. The Inspection Panel reported that the alignment of the drainage canals was "technically and environmentally risky", and "technical mistakes were made during the design" of the canals. Consequently "increased salinity has affected large tracts of agricultural lands" and the failure of the drainage infrastructure "has led to major harm to the ecosystem, wildlife and fisheries". Increased flooding, which was partially caused by the project, claimed more than 300 lives in 2003. Bank management has accepted that some mistakes were made but ultimately asserts that the "Bank was diligent in the application of its policies and procedures during implementation of the NDP". Affected communities, and NGOs ActionAid Pakistan and International Rivers Network (IRN), have requested that the Bank pay reparations to address the grievances of the affected people, and stop financing large dam and canal projects in Pakistan. More than 1,000 affected people met in the project region at the beginning of October and put forward a list of 13 demands. According to Mustafa Talpur of ActionAid Pakistan, "there must be a comprehensive plan for protection, promotion and restoration of livelihood sources such as agriculture land, livestock, fisheries, grazing areas and forests". The affected people also demanded that alternative drainage options must be identified with the full participation of the affected communities, and that the loan amount be converted into a grant, and the proceeds spent for reparations to the affected communities. The Bank's most recent Country Assistance Strategy for Pakistan reveals plans to increase lending for the country's water sector ten- fold during the 2006-09 period and to invest in new, contentious large dam projects. Laos: inadequate compensation ----------------------------- During a June visit to the project site, staff members from IRN witnessed numerous concerns relating to the Nam Theun 2 dam (see Updates 45,48). IRN observers found that provisional cash compensation provided to affected communities for loss of land, rice fields and common property resources has been wholly inadequate to compensate for the lost production values. In addition, many resettled villagers are currently living in temporary housing and suffering water shortages because boreholes have not yet been dug. Other concerns include: *no clear management plan for logging operations; *damage to fish stocks in the reservoir area and downstream; *excessive dust in roadside villages; *threats to two nearby national biodiversity conservation areas; and *delays in the release of studies relating to social and environmental aspects of the project. IRN also discovered that the Lao national hydropower policy, enacted in June 2005 and a precondition for World Bank support, is not being properly implemented. The policy includes requirements for a full environmental impact assessment and management plan, and compensation for all those affected. Despite this, the World Bank recently expressed satisfaction with the overall progress of the project despite a delay at the start due to serious weather conditions. On the release of the latest semi-annual update on implementation Ian Porter, World Bank country director for South East Asia declared that: "The construction of the project is now on track to meet some of the key expectation needs including the date for filling the reservoir within 2008 and the date of beginning of commercial operation on December 2009." "Dirty like diesel" ------------------ As part of a renewed push to boost energy investment in Sub-Saharan Africa (see page 7), the World Bank has stated that Africa must double its investments in power generation if it is to ease chronic blackouts and extend electricity from a quarter to half of its population. The clean energy investment framework states that donors will need to double investments from $2 billion to $4 billion a year. Jamal Saghir, director for energy and water in the World Bank Group's private sector development and infrastructure vice presidency has rejected NGO reports of the environmental and social devastation that large hydro can cause: 'You can not tackle the issue of [energy] access in Africa only with small projects, even if some of them are dirty like diesel (powered generation)'. In October Juan Jose Daboub, World Bank managing director, stated that the Bank is working with the Ugandan government to obtain technical assistance for the contentious Bujagali hydropower plant (seeUpdates 28, 47), for which it removed its support in 2003 following a corruption investigation and the withdrawal of the main sponsor, US-based AES Corporation. The World Bank is also considering providing $200 million for revamping the Inga hydropower station in the Democratic Republic of Congo (DRC) by the end of the year. Much of the electricity would be exported to South Africa, despite the lack of energy access in the DRC, still reeling from years of civil conflict. The World Bank has been investigated by its own accountability bodies for its involvement in the forest and mining sectors of the country on the grounds of corruption, human rights abuses and the destruction of biodiversity. Lao dam: obligations undermined? http://brettonwoodsproject.org/nt248 Bank environmental commitment under fire http://brettonwoodsproject.org/essd52 Inspection Panel: National Drainage Programme Project, Pakistan, Inspection Panel http://web.worldbank.org/WBSITE/EXTERNAL/EXTINSPECTIONPANEL/0,,conten tMDK:20267348~pagePK:64129751~piPK:64128378~theSitePK:380794,00.html IRN trip report to Lao PDR, International Rivers Network http://www.irn.org/programs/mekong/namtheun.php?id= 060919tripreport.html ActionAid Pakistan, ActionAid Pakistan http://www.actionaid.org/pakistan/1782_5_3902.html ===================================================================== 21. Bretton Woods Project faces drop in support --------------------------------------------------------------------- At this year's World Bank/IMF annual meetings in Singapore, 27 accredited civil society representatives were blacklisted by the country's authorities (see page 3). Many more were detained, interrogated and even deported. This, despite NGO concerns raised months in advance about the choice of Singapore as a venue. Such events demonstrate why the Bretton Woods Project - networker, information-provider and watchdog on a UK, European and international level - has a critical role to play. Our work is read by over 10,000 activists, journalists, officials and researchers worldwide. Our largest foundation supporter has been forced to cut its backing of the Project by 20 per cent in the next period. Therefore, we need your help so that we can continue to provide the same high-quality research and analysis. We know you value our work - we need your support to be able to continue it. For credit card donations or to set up a direct debit, please go to our website: http://www.brettonwoodsproject.org/donate To donate by cheque please enclose a cheque/postal order made payable to 'ActionAid supporter payments - Bretton Woods Project' and return to: ActionAid FREEPOST BS4868 Chard Somerset TA20 1BR Update survey prize winners --------------------------- We would like to send our thanks to all the readers who took time out to give us feedback on the Bretton Woods Update. Congratulations go to the winners of our prize draw. The copies of The Globalizers by Ngaire Woods were won by Elena Sisti (Italy), Dominic Kemps (UK), Stephen Nkem Asek (Cameroon), Cassandra Goldie (Australia) and Benjamin Agyemang (UK). The copies of New Development Economics edited by Ben Fine and Jomo KS were sent to Gertrude Eigelsreiter- Jashari (Austria), Tosca Bruno-van Vijfeijken (USA), Fabien Lefrancois (El Salvador/France), Ruel Macaranas (Philippines) and Dragan Nastic (UK). Finally, The World Bank and Governance edited by Diane Stone and Chris Wright, was won by Owen Espley (Netherlands), Ray Bjornosson (USA), Xavier Leus (Switzerland/USA), S. W. K. J. Samaranayake (Sri Lanka) and Arif Zulfiquar (USA). We hope to update you in more detail on the results of the survey in the next issue. ===================================================================== 22. Best Bankspeak and resources from 2006 --------------------------------------------------------------------- Continuing a much-heralded tradition at the Bretton Woods Project, the first issue of 2007 will feature 'Bankspeak of the year' - the most incomprehensible use of words in a Bank or Fund document or speech. Also, we will present your list of recommended resources - the best of books, reports and articles written about the work of the Bank and Fund in 2006. Suggestions from readers for both features are very welcome. --------------------------------------------------------------------- ----------- Review last year's Bankspeak awards and Resources of the year: http://www.brettonwoodsproject.org/bankspeak2005 http://www.brettonwoodsproject.org/resources49 Send your suggestions to bankspeak@brettonwoodsproject.org ===================================================================== 23. Research, knowledge and the art of "paradigm maintenance": The World Bank's development economics vice-presidency (DEC) --------------------------------------------------------------------- Robin Broad, professor in the School of International Service at American University, describes six mechanisms by which the World Bank's development economics vice-presidency (DEC) performs a "paradigm-maintenance" role, privileging individuals whose work "resonates" with the neo-liberal free-market ideology. Unbeknownst to most who work on the World Bank, this institution is not only the main lender of public money in the world. It is also the world's largest development research body, centred in DEC1. DEC is important because it serves as a research department for other bilateral aid agencies and other multilateral development banks, which often follow the course laid out by the Bank. So too with the World Trade Organization which, according to an internal Bank document "looks to the Bank to provide analysis on trade integration policies." And Bank research is consulted by policy-makers across the globe. In academia, as well, relevant courses often rely heavily on Bank research papers. In short, DEC is the research powerhouse of the development world. The Bank likes to claim that DEC conducts the crème-de-la-crème of development research and that governments and researchers should view it as an impartial 'knowledge bank' on development, conducting rigorous and independent research. After a careful look inside DEC (including a couple dozen interviews with former and current Bank staff), I have reached a different conclusion: through its research, the World Bank has played a critical role in the legitimisation of the neo-liberal free-market paradigm over the past quarter century and its research department has been vital to this role. As activists working on the World Bank explore which parts of the Bank should be eliminated or reformed, they should look closely at the Bank's research department as well as its external affairs department which disseminates broadly this less than objective research. The work of perhaps the best-known World Bank researcher, David Dollar, exemplifies the "paradigm-maintenance" role (a term taken with gratitude from Robert Wade)2. For many in the media, academia, and policy-making circles, Dollar's work on trade and economic growth has been transformed into a widely-cited, empirically-proven 'fact' that 'globalisers' - countries wedded to the Washington Consensus, especially to liberalised trade - experience higher economic growth rates than 'non-globalisers'. As Dollar and a co-author phrased it in a 2002 article in Foreign Affairs: "openness to foreign trade and investment, coupled with complementary reforms, typically leads to faster growth." How did Dollar's work become so prominent? Why does the work of Bank DEC researchers who support the neo-liberal policy agenda get widespread attention? I discovered a set of six inter-related processes and mechanisms through which DEC, at times collaborating with other parts of the World Bank, performs its paradigm-maintenance role by privileging individuals and work "resonating" with this ideology. These mutually-reinforcing structures include a series of incentives - increasing an individual's chances to be hired, to advance one's career, to be published, to be promoted by the Bank's external affairs department, and, in general, to be assessed positively. And, they also include selective enforcement of rules, discouragement of dissonant discourse, and even the manipulation of data to fit the paradigm. As the article demonstrates, this incentive or reward system is typically unstated, may even negate the formal or stated procedures and, as such, functions as "soft" law. This is done in a way that undermines debate and nuanced research conclusions, instead encouraging the confirmation of a priori neo-liberal hypotheses.3 Here is a brief overview of the six sets of mechanisms (unless otherwise indicated, quotations are from my interviews): 1. Hiring --------- The structures through which these incentives play out are multiple and they begin with hiring biases. While countries of birth and nationality may lead to a superficial assessment that the staff is international and diverse, the Bank is far from diverse. Bank staff are overwhelmingly PhD economists. Boundaries of disciplines in and of themselves set intellectual boundaries, defining acceptable questions and methods. DEC houses fewer than a handful of non- economist social scientists. Further concentrating thought, the US and the UK university economics departments supply most of the PhD economists working within DEC. So too are the Bank's generous pay scale and benefits part of this incentive structure. This is what a former Bank economist terms "the golden handcuffs". While the Bank claims these are necessary to attract the best staff, what they actually do is limit dissent by increasing the "opportunity costs" of any dissidence. 2. Promotion ------------ There are a number of ways in which promotion incentives help shape the work toward "paradigm maintenance". The overarching goal of any researcher who wants to make a career of the Bank is to achieve, after five years, "regularisation", the Bank equivalent of academic tenure. Along the way, there are annual reviews. Gilbert et al. (2000) note that "most Bank employees are on short-term contracts. There is substantial anecdotal evidence that this is distorting incentives away from creative thinking and towards career-path management." 4 To get good reviews, DEC professionals need to publish, ideally in both internal Bank publications and externally especially in academic journals. Reviews also look at a DEC researcher's influence on Bank operations and policy. The Bank has set up formal structures to try to ensure the transfer of research 'knowledge' to operations. Most notable is that one-third of a researcher's time must be spent doing what is called operational "cross-support". In devising a work programme, the researcher is aware that he/she will "need marketability for 1/3 time" when she/he is a de facto "free agent". In terms of the characteristics of a "marketable" DEC researcher, as one senior economist in DEC explains, operations looks for high- profile folks with "resonance." To paraphrase, if you are in operations and you are looking to buy the time of a researcher, you look to add someone who is likely to improve the chances of your project getting through. "You want a Dollar", one interviewee states bluntly without provocation. Conversely, asks one non-neoliberal- economist researcher rhetorically: why would operations want me? 3. Selective enforcement of rules --------------------------------- DEC's paradigmatic bias is also reflected in the process of reviewing ongoing research for publication. The Bank likes to claim that there is uniform, objective, external review, but that is not the perception of individual researchers themselves. While there may be written rules with specific requirements (which this author has yet to see, despite repeated attempts), evidence suggests and interviews confirm that reviews of proposed research, manuscripts, and individuals are done "selectively". Most of those interviewed for this article offered that research critical of the neo-liberal model or opening the door to alternatives (i.e. without that necessary "resonance") is likely to undergo stricter external review and/or be rejected. The review process, says a former Bank professional, "depends on what the paper is [about] and who the author is. If you are a respected neoclassical economist, then [approval] only needs one sign-off, that of your boss. If it's critical, then you go through endless reviews, until the author gives up." 4. Discouraging dissonant discourse ----------------------------------- In 1996, then-Bank president James Wolfensohn launched the initiative to magnify the research and dissemination role of the World Bank by transforming the institution from what was called a 'lending bank' into a 'knowledge bank'. The implication was that the World Bank was a place where all views, all ideas, all empirical data on development would be available to the world. DEC demonstrates how badly the Bank fails in this regard. Dissent is allowed on more marginal issues, but seldom on the core tenets of the neo-liberal model. How does this discouragement of dissent occur? Discourse is part of the answer. On numerous occasions when the present author asked Bank staff about someone whose work has raised dissent, the response was invariably that that person was "idiosyncratic" or "iconoclastic" or "disaffected". In other words, people who do not project the Bank's paradigm are diminished or ostracized or deemed a "misfit". Former DEC official David Ellerman has described the Bank as "an organisation where open debate is not a big part of the culture".5 This lack of openness to dissent is all the more troubling in the context of the rapidly evolving post-Seattle and post-Asian-crisis debate on development. Since the late 1990s, with the rise of a global backlash against the neo-liberal model, there has been - outside the Bank - a vibrant theoretical and policy debate about neo- liberal economic globalisation as evidence grows of its negative impacts on economic, environmental, and social development. During this period, Bank projects and policy-based lending have come under heavy attack for contributing to these negative impacts. Yet, the Bank has been able to continue to operate relatively unchecked in its research work. Take Dollar's work. There has been widespread external criticism of Dollar's methodology by non-doctrinaire economists outside of the Bank - from Harvard economist Dani Rodrik, Center for Economic and Policy Research director/economist Mark Weisbrot, London School of Economics' Robert Wade, Cornell professor (and former Bank professional) Ravi Kanbur, and others (including the present author). Rodrik, for example, reaches a conclusion opposite of Dollar's: "The evidence from the 1990s indicated a positive (but statistically insignificant) relationship between tariffs and economic growth."6 Yet, the Bank continues to project Dollar's work as if it is undisputed fact. "The point," explains a DEC economist, "is that one type of research is encouraged, people know what type it is and they produce it, while another type is given short-shrift." 5. Manipulation of data ----------------------- What does the Bank do if data/research does not support a neo-liberal hypothesis? There is disturbing evidence that the Bank crafts, and even manipulates, the executive summaries and press releases of reports so that they reinforce the neo-liberal paradigm. A case in point of an executive summary that is so well crafted that it no longer meshes with the text of the report is a 350-plus-page 2003 Bank document on Lessons from NAFTA for Latin American and Caribbean Countries. The summary states that "real wages [in Mexico] have recovered rapidly from the 1995 collapse". However, the text itself does not support this conclusion, as researcher Sarah Anderson noticed as she read the text carefully: "Table 1 of the summary shows that real wages in both local currency and in dollars have dropped since 1994. - Figure 4 in the main body of the report shows that real Mexican wages relative to those in the US are also below their 1994 levels." Anderson wrote report co-author Daniel Lederman to ask how the table's drop in real wages in the 1994-2001 period could have been summarised as a return to a level "roughly equal" to 1994. Lederman responded that the wage trends were complicated and therefore the summary was meant to "be vague". As Anderson replied: "to say that wages have returned to their 1994 levels when they have not is not merely 'vague' but is inaccurate". Yet, Anderson seems to have been one of the few to read the report carefully enough to note this key discrepancy or "falsehood" (as she more accurately phrases it). Indeed, in 2004, the Washington Post ran a long, lead editorial on the success of NAFTA, based in part on the World Bank report. Incredibly enough, the editorial chastised NAFTA critics who say that wage growth has "been negligible" and instead noted that "wage levels that match those existing before the peso crisis represent an achievement." In other words, the Bank seems to understand and play to the fact that most people, including most journalists, will read only the press release and summary. In this case, on a significant arena for potential policy debate and reform, the Bank fooled a major newspaper whose editorials are read and used by key policy-makers. 6. External projection ---------------------- My research also concluded that the Bank's external affairs department functions as a projector of DEC's "paradigm-maintenance" role. Dollar, for instance, did not have the backing only of DEC. The Bank's external affairs department stepped in to publicise his work; it is external affairs that has the "money, media contacts, and incredible clout" to fly an author around the world. External affairs' rise in stature dates from the early Wolfensohn years under the leadership of Mark Malloch Brown (1994-99). In Wolfensohn's second term, external affairs' budget soared. By 2004-5, its budget was comparable to the full annual budget of the right-wing US think tank the Heritage Foundation. Conclusion ---------- These six sets of incentives raise significant questions about the World Bank's own argument that it produces work of the utmost quality and integrity. My research should certainly raise alarm about further concentrating and aggrandising this role of knowledge production and marketing in the World Bank. In fact, my research suggests just the opposite. At this moment of identity crisis within the Bank, this is an opportune moment to question "paradigm maintenance" and to rethink fundamentally research - knowledge production and dissemination - at the World Bank. My inquiry into a part of the Bank that has been shockingly unexplored by outsiders also opens the door to thinking about new arenas for advocacy work on the Bank. Does the Bank really need a biased research department? Does the Bank really need an external affairs department to tout research that reinforces the highly discredited neo-liberal model? Governments and private foundations that support World Bank research and publicity would do far better to support independent research institutions that are stimulating a more diverse development debate. --------------------------------------------------------------------- This article is adapted and condensed, with permission, from: Robin Broad, "Research, Knowledge, and the Art of 'Paradigm Maintenance': The World Bank's Development Economics Vice-Presidency (DEC)," Review of International Political Economy 13:3 (August 2006): 387-419. Robin Broad is professor, international development program, School of International Service, American University in Washington, D.C. Her books include: Global Backlash: Citizen Initiatives for a Just World Economy (Rowman & Littlefield), Plundering Paradise: The Struggle for the Environment in the Philippines (University of California Press), and Unequal Alliance: The World Bank, the International Monetary Fund, and the Philippines (University of California Press). She is on the board of the Bank Information Center. Readers may also be interested in another recent paper of Broad's, coauthored with John Cavanagh: "The Hijacking of the Development Debate: How Friedman and Sachs Got It Wrong," World Policy Journal (Summer 2006). A shorter, fully-formatted PDF version of this briefing is also available. The World Bank’s knowledge roles: dominating development debates http://brettonwoodsproject.org/atissueknowledge Knowledge Bank evaluation criticises "reluctance to consider alternatives" http://brettonwoodsproject.org/OEDknowledge ===================================================================== 24. The IFC’s lessons of experience & the Chad-Cameroon oil and pipeline project --------------------------------------------------------------------- In September 2006, the IFC published the first issue of its new publication series entitled Lessons of Experience, which it dedicated to the experience of employing external monitors in the Chad-Cameroon Oil & Pipeline project. According to the IFC, external monitors can provide a transparent, impartial and independent record of a project's compliance with its environmental and social commitments. Although the upfront costs of external monitoring may be significant, the IFC argues that these costs represent a valuable investment in reputational risk management and help prevent litigation, costly project delays and community upheaval. The IFC recommends the use of external monitors especially in highly visible projects such as those involving extractive industries and involuntary resettlement. In the case of the Chad-Cameroon Oil Project, the IFC appointed D'Appolonia S.p.A., a consulting firm from Italy, to form the External Compliance Monitoring Group (ECMG). The ECMG began by making quarterly site visits during the construction period which was reduced to one annual visit during the project's operational phase. The work of external monitors can indeed provide much value added but can also be used as a public relations tool and a fig leaf for poor implementation of social and environmental commitments. The specific case of the ECMG's work in the Chad-Cameroon projects is a case in point. The ECMG's technical expertise on issues ranging from hazardous waste management to archaeological heritage protection has helped fill gaps in the information about project impacts. Its meticulous checklists and access to company records have further added to a systematic knowledge base about the implementation of a complex environmental management plan. Unfortunately, however, the ECMG's work has not made the difference on-the-ground that it could have. There are inherent structural problems when the ECMG has to make repeated recommendations about serious problems - such as intense dust pollution that diminishes visibility, damages fields and crops and affects public health - which are not adequately being solved after several years of ECMG warnings. In addition, the ECMG committed a serious error in August 2004 when it provided the project with a certificate of compliance, certifying that the project had adhered to the environmental management plan. According to the ECMG, it had only found one level 3 non-compliance (the most serious non-compliance) which concerned the failure to protect archaeological sites, an area often considered to be of minor importance in the context of poor African countries. When questioned about this, a member of the ECMG responded that the certificate of compliance was a mere formality and that the ECMG fully recognized that there were numerous outstanding issues ranging from toxic waste management to additional land expropriation, dust control management and public health. He explained that the ECMG had only listed one serious non-compliance problem because it had decided not to assign categories to the violations it encountered. He added that this decision was based on concerns that assigning categories would focus discussion on the reasons for the categorisation instead of on finding solutions.1 Unfortunately, the certificate of compliance and the listing of a single serious non-compliance issue were quite misleading and provided both lenders and project-sponsors with apparent proof of their claim that the project was a success story. However, even a cursory reading of the most recent ECMG report reveals that issuing a certificate of compliance was at best premature. The report lists several instances where project sponsors have failed to live up to the commitments they had made at the time when the certificate of compliance was issued. For example, the ECMG found that the project had taken twice the amount of land and that there were three times the number of households who could no longer survive on their land than the Environmental Management Plan (EMP) had estimated. Yet despite the severe impact on already very poor populations, the ECMG observed that EMP obligations with regard to monitoring livelihood restoration were not being complied with2. The ECMG observed other serious non-compliant conditions such as the failure to minimize the risks to the safety and health of local communities in the oil field region. An example from the Cameroonian side of the project includes the ECMG's warning about the continued ineffectiveness of FEDEC, the foundation set up by the project to meet the requirements of World Bank Operational Policies on Natural Habitats (OP 4.04) and Indigenous Peoples (OP 4.20). The ECMG considers that the failure to meet the Bank's policies could be considered a major non-compliance with the EMP commitments3. On a broader level, the ECMG notes that there are insufficient staff and resources dedicated to the EMP in the oil field region. Returning to the IFC's Lessons of Experience, the IFC rightly emphasizes the need for the external monitors to be perceived as neutral in order to be effective. It also provides guidelines meant to allow the external monitor to avoid conflicts of interest. These are important underpinnings because ultimately the usefulness of the external monitor depends on being accepted by both project sponsors and by the affected communities and the NGOs they work with. However, the IFC's lessons drawn from the experience with the ECMG in the Chad-Cameroon project read more like a tool to market the concept of external monitor to IFC clients than lessons meant to design a more effective role for the external monitor in improving implementation of social and environmental commitments. There are additional lessons we can draw from the Chad-Cameroon project experience which we would like the IFC to include: It is frustrating when the external monitor makes repeated recommendations on serious social and environmental problems without any obvious results. The IFC should systematically acknowledge these recommendations, work with its clients on mitigation, and report publicly on how the problems have been addressed. The IFC paper acknowledges that environmental and social management plans may be too narrowly focused and may not address environmental and social problems which become evident during the life of the project. It is therefore important that the terms-of-reference for the external monitor allow sufficient flexibility to address problems as they arise. Issuing a certificate of compliance while serious non-compliance problems persist undermines the credibility of the external monitor and harms working relationships with civil society organizations. The external monitor should not feel pressed into issuing a certificate of compliance as if it were a mere formality and should have the right to withdraw such a certificate once the situation on-the-ground reveals non-compliance problems. Furthermore, the IFC might wish to explain why it does not use an external monitor to cover the development of new oil fields in Chad. The World Bank Group and the government of Chad had agreed that all new oil development that will eventually use the World Bank-supported pipeline would have to be subject to the same environmental and social safeguards as the original project. In view of this agreement, it is difficult to discern why the work of the external monitor is limited to the initial three oil fields. According to the IFC, the up-front costs for the ECMG are estimated at less than $ 2 million ($ 1.5 million during the construction phase and $ 100,000 per visit during the operational phase). The IFC's argument is that such expenses have a way of paying for themselves by preventing problems such as corporate brand damage. While it is the project sponsors who pay for the external monitor, it is important to keep in mind that profits from the project pay for this expense and that ultimately the real costs of the project are born by the communities whose environment and livelihoods are deeply affected by the project. Bank freezes pipeline funds to Chad http://brettonwoodsproject.org/chad49 Environmental Defense, international programme, Environmental Defense http://www.environmentaldefense.org/programs.cfm?subnav=70 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Published by Bretton Woods Project Critical voices on the World Bank and IMF No permission needed to reproduce articles. Please pass to colleagues interested in the Bank and Fund, and let us know of other groups interested in getting the Update. The Update is available in print, on the web and by e-mail. Bretton Woods Project Hamlyn House, Macdonald Road, London N19 5PG, UK Tel: +44 (0)20 7561 7610 Fax: +44 (0)20 7272 0899 Subscribe at or An independent non-governmental organisation supported by a network of UK NGOs, the C.S. Mott Foundation and the Swedish Society for Nature Conservation. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + END