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BRETTON WOODS UPDATE
A bi-monthly digest of information and action on the World Bank & IMF

Number 60, March/April 2008

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Special spring meetings edition
A co-production of the Bretton Woods Project with Afrodad, Bank
Information Center, Choike and Eurodad

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1. World Bank climate funds: "a huge leap backwards"
2. The Bank, Brazil and biofuels
3. Leaky logic: dams in three countries
4. Forest carbon facility: more harm than good?
5. COMMENT: Camisea and the World Bank: A lost opportunity
6. Calls for Bank to uphold rights
7. Palacio resigns: progress on rights?
8. Rural electrification failing the poor
9. Bank powerless to end Chad abuses
10. Sri Lankan small farmers slam World Bank
11. Inside the institutions The World Bank and health
12. Training for nothing? IFIs asked to surrender reins over capacity
    building
13. Bank both player and referee in road to Accra
14. Rebuke for UK's World Bank love affair
15. New World Bank financial products
16. Venezuela v. Exxon back to ICSID?
17. Slaughtering the Amazon
18. Europe questions IFI conditionality: whose outcome?
19. IFIs foot dragging on key debt issues
20. The IMF in Argentina: the search for relevance
21. World Bank and procurement: Development tool or TNC sop?
22. A taxing agenda for the IMF
23. NGOs demand US Congress to put conditions on IMF gold sales
24. IMF pension reform prompts Turkish strikes
25. IMF rebukes Tajiks over false information
26. Fund trade advice in the crosshairs
27. IMF governance renovations: fresh paint while foundations rot
28. World Bank strategic review kicked into long grass
29. IFC challenges highlighted in the Middle East: Doing Business
    indicators come under fire
30. World Bank-IMF spring meetings 2008
31. Special issue: Feedback wanted


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1. World Bank climate funds: "a huge leap backwards"

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The proposed climate investment funds to be administered by the World
Bank are under fire for undemocratic governance and undermining the
UN framework convention on climate change (UNFCCC). Meanwhile World
Bank support for coal-fired power generation is increasing.

The Bank's initial portfolio would consist of three funds.

The Clean Technology Fund will assist with transformation to low
carbon economies, mitigation of green house gas emissions, and
international cooperation on climate change. Its target size is $5-10
billion.

The Forest Investment Fund will "provide financial incentives to
reduce emissions from deforestation and degradation. It would support
countries participating in the Forest Carbon Partnership Facility
(see page 2). Its target size is $1 billion.

The Adaptation Pilot Fund will "pilot ways to mainstream climate risk
and resilience into core development planning". It will also
influence the design of the Adaptation Fund recently agreed at
UNFCCC, and initially focus on five to ten low-income or climate-
vulnerable countries. It also seeks to raise $1 billion.

The Clean Technology Fund was publicly proposed by finance ministers
of the US, UK and Japan in a joint statement published in the
Financial Times on 7 February. They made "major commitments" to the
various funds and urge other governments to do the same. The US has
pledged $2 billion over three years and the UK will channel its $1.6
billion Environ­mental Transformation Fund into the funds. Japan will
contribute $10 billion though it is not clear how this will be
channelled through the Bank. So far no other donors have pledged
support.

The Bank's January Consultation draft on climate investment funds
states that each investment fund would have "an independent
governance structure comprised of donors to that particular fund,
which has ultimate control over that fund". Questions raised in the
draft regarding the "voice of recipient countries in the governance
structure" remain unanswered. The decision making process would be
made by consensus, as on the Bank's board.

The Bank would host a secretariat for the funds, collaborate on the
selection of staff and management, and serve as a trustee. A minimum
contribution for trust fund secretariat members, the level of which
is still "to be decided", will be set, raising serious concerns that
smaller countries may be excluded from the governance of the funds.

At a mid-March meeting of G20 energy and environment ministers in
Japan, South African environment minister Marthinus Schalkwyk pointed
out that it was only in the past few weeks that developing nations
have even been consulted. He said "the World Bank should keep its
distance from global climate talks [and] shouldn't become a player in
the negotiations because that will load the dice against developing
countries".

In a report One step forward, two steps back? Benito Müller, of the
Oxford Institute for Energy Studies, and Harald Winkler of the
University of Cape Town point out that the World Bank is pushing
ahead with "complete disregard" for the principles of partnership and
mutual ownership of the Paris Declaration on Aid Effectiveness (see
page 6).

The Bank's proposed Adaptation Pilot Fund is seen by many developing
countries as a serious threat to the new Adaptation Fund agreed at
Bali whose board would have a majority of developing country members
and designated representation from least developed countries and
small island states. It would meet in Bonn, the seat of the UNFCCC
secretariat. The World Bank would only be minimally involved in its
management. By comparison Müller and Winkler assert the Bank's fund
is a "huge leap backwards".

A letter to the UK secretary of state for international development,
Douglas Alexander, from 22 UK and international NGOs reiterated these
concerns. It argued that the suggestion to offer concessional loans
instead of grants for adaptation financing is "inappropriate", given
that the impact of climate change on developing countries was
"largely created by rich countries".

Despite high-level UK support, a recent report on DFID and the World
Bank by the UK parliament's International Development Com­mittee (see
page 6) concludes that "we are sceptical that creating a new trust
fund in addition to the dozen or so that already exist within the
Bank for such work is the best way forward for this money." It
recommends "that DFID conduct an audit of the current bilateral and
multilateral funds available for international climate change work
... before final decisions are taken."

David Wheeler of the Washington-based Center for Global Develop­ment
asks "does anyone really believe that donor-country taxpayers will
continue supporting the Bank Group if it takes billions for the Clean
Technology Fund with one hand and invests billions in coal-fired
monsters with the other?" He undermines Bank claims that it is
providing value-added by supporting supercritical coal-combustion
power plants (see Update 59), puts forward solar as an economically
feasible alternative, and recommends using the Clean Technology Fund
to fill the remaining cost gap.

He analyses two supercritical coal-fired power plants that the Bank
is considering funding: Tata Power's 4,000 megawatt plant in Mundra,
Gujarat and the planned Mmamabula plant in Botswana, which would
supply power to the South African electric grid. In the case of
Mundra he points out that several other private and public sector
supercritical plants are already under construction or planned in
India, thus precluding the need for Bank subsidies.

In Crossroads at Mmamabula, Wheeler points out that the country's
solar energy potential, which could easily exceed the power
expectation of Mmamabula, was recently documented in a Bank study.
The Bank should adopt an explicit carbon accounting charge added to
all fossil-fuel projects. Though subsidies may be needed to induce
clients to borrow for low-carbon projects, "client interest should
increase as Bank programmes demonstrate the viability of large-scale
low-carbon energy systems".

At end March the IFC board was to discuss funding up to $750 million
for Mundra. In mid-April it will discuss two loans of $150 million
each to the Calaca coal-fired facility south of Manila. In November
2007 the IFC approved $275 million for the Masinloc coal-fired power
plant in the Philippines.

One step forward, two steps back?
http://www.oxfordenergy.org/pdfs/comment_0208-1.pdf

UK NGO letter on climate funds
http://www.ifiwatchnet.org/node/7081


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2. The Bank, Brazil and biofuels
By María José Romero, Choike

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The World Bank has become a major financial and political supporter
of Brazil's campaign for sugar cane based ethanol and the free market
for biofuels. Currently, the IFC is investing around $200 million in
three such projects in São Paulo state.

In a recent speech Bank president Robert Zoellick said that the
expansion of an ethanol market could help mitigate climate change,
"if we remove trade barriers in developed economies." During his time
as US trade representative from 2001 to 2005 Zoellick was a tough
adversary of Brazil in international negotiations. He has since
changed his tune following the boom in biofuels. Zoellick's speech
was transmitted by video link to the G8 plus 5 Legislator's Forum on
Climate Change, held in Brasilia in February.

Civil society organisations, such as Friends of the Earth Brazil
argue that the expansion of large-scale monoculture for export
threatens small-scale family run agriculture – which forms the basis
of the region's food security – water availability, and the most
productive land for food cultivation.

Bancos multilaterales y la exportación de los agrocombustibles
http://www.biceca.org/es/Article.710.aspx


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3. Leaky logic: dams in three countries
By Soren Ambrose, Bank Information Center and Lucy Baker, Bretton
Woods Project

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Recent reports have raised new questions about the impacts of World
Bank-funded dams in Uganda and Lao PDR, while in Mozambique the Bank
will likely be asked to fund a controversial project  spearheaded by
China.

The 250 megawatt Bujagali dam (see Update 59, 56) is the subject of
two investigations – one by the World Bank Inspection Panel and the
other by the African Development Bank’s counterpart – following
claims by the Ugandan NGO National Association of Professional
Environmentalists.

According to the World Bank and other project stakeholders,
“financial closure” for Bujagali was achieved in December 2007 after
construction had already begun in August. In total the Bank is
lending $130 million from the IFC, and $115 million each from IDA and
MIGA in risk guarantees.

A key concern about the dam is its potential impact on nearby Lake
Victoria, Africa’s largest lake. A new report published in Wetlands
­Ecology and Management finds that smaller dams near the Bujagali
site have used far more water than expected and caused the lake’s
level to decrease by at least two metres over a six-year period. This
has dried papyrus wetlands adjacent to the lake which are key to the
area’s ecology and devastated its stock of tilapia fish, a main
source of food and commercial income for lake communities.

In Lao PDR, implementation of the Bank-supported Nam Theun 2 dam (see
Update 56) has reached a critical juncture. The recent Nam Theun 2
trip report and project update by NGO International Rivers (IR)
states that the reservoir will be filled in just a few months, yet
social and environmental programmes continue to lag behind.

Having met with local villagers and reviewed project documents during
a visit to Lao PDR in November 2007, IR notes that the resettlement
of villagers on the Nakai Plateau and the implementation of
livelihood restoration programmes are critically behind schedule. In
addition, “downstream the $16 million budget and proposed
compensation and mitigation measures are inadequate to deal with the
scale and severity of NT2’s impacts on communities”. A pr­oposed
biomass clearance programme has been cautiously welcomed, though it
will likely be insufficient to solve water quality problems. At end
February the Bank admitted to some of these problems in an interim
report and added new requirements for the government and the NT2
power company to comply with. IR argues that despite this and
numerous monitoring missions, the Bank has not taken strong enough
stances to correct critical problems.

In light of the increased frequency and intensity of flooding in the
Zambezi River Valley in Mozambique, the location of the long-planned
Mphanda Nkuwa dam, the government is now recommending that 100,000 of
the evacuees who were forced out of the valley in January and
February re-locate permanently to the areas where they have been
resettled. Mozambican president Armando Guebuza has declared not only
that the 1,350 megawatt dam “will not put the environment in any
danger,” but also that it will help forestall flooding. His
government continues to seek financing for the project which will
supply energy mostly to South Africa rather than the 95 per cent of
Mozambique’s population without electricity. Though China is expected
to provide the bulk of the financing, the World Bank is anticipating
a­ request for partial funding – as discussed in Mozambique’s letter
of intent to the IMF in January – or at least to certify that
environmental standards are being upheld.

Advocacy groups like the Mozambican NGO Justiça Ambiental warn that
Mphanda Nkuwa would nullify years of work to restore the fragile
Zambezi delta region, which has been devastated by the even larger
Cahora Bassa dam.

Hydro electric dams pose a threat to Lake Victoria
http://www.sciencedaily.com/releases/2008/01/080129125342.htm

IR NT2 trip report and project update
http://www.internationalrivers.org/en/node/2516

Article on Mphanda Nkuwa
http://allafrica.com/stories/200802080924.html


===================================================================

4. Forest carbon facility: more harm than good?

---------------------------------------------------------------------

As details emerge of the World Bank’s new facility to pay countries
for preventing deforestation and degredation, concerns about its
operations and governance mount.

A draft ‘information memorandum’ was circulated end 2007 on the
Forest Carbon Partnership Facility (FCPF) which is to assist
selected countries to find the most cost effective way to reduce
carbon emissions from forest degradation and promote carbon trading-
based incentives for those reductions (see Update 57). The memo
outlines operating arrangements for the funds that make up the FCPF,
as well as the applicability of Bank safeguards and operational
policies, and includes a draft charter.

There will be two funding mechanisms: a $100 million ‘readiness fund’
and a $200 million ‘carbon fund’. Contributions to date include:
Germany $57 million; UK $30 million; Netherlands $15 million;
Australia $10 million; Switzerland $7 million; and $5 million from
conservation NGO The Nature Conservancy. The Danish government has
reportedly made its support contingent on the Bank addressing forest
dwellers’ rights.

The purpose of the readiness fund is to provide financial support to
countries to prepare them to begin trading avoided carbon emissions.
Countries would be supported to establish a baseline (past emissions
levels caused by deforestation and degradation), create a strategy
for Reduced
Emissions from Deforestation and Degradation (REDD) at a national
level, and then design and create a monitoring system for the
strategy.

The carbon fund is what would actually pay for the emissions
reductions of the five pilot countries who are considered ‘ready’.
The fund’s secretariat would assess the carbon impact of various
policies including general economic policies, forest policies, forest
management and rural development, and pay countries accordingly.
Despite having no evidence yet of the fund’s effectiveness, the
programme is to be scaled-up to the newly-announced ‘Forest
Investment Facility’ (see page 1) which aims to raise over $1
billion.

Officials from some developing countries have asked how countries
which have more sustainably managed their forests in the past will be
credited. Two new NGO reports have highlighted the risk of flooding
the market and driving down the carbon price, and the inadequacy of
indigenous peoples’ participation in the design and governance of the
facility.

According to a report by NGO Rainforest Foundation, “inclusion of
forest-based carbon credits in anything like the existing size of
carbon markets might, at best, produce too little too late and, at
worst, do more harm than good by depressing the price of carbon below
a level at which real emissions reductions projects were financially
viable”. Using carbon trading to prevent deforestation on any scale
will require that a number of very challenging preconditions be
achieved, including that rich countries agree to deep emissions
reduction commitments. Rainforest Foundation believes that political
energy should be focused on ensuring that these conditions are
achieved, “rather than becoming overly absorbed in the probably only
marginally effective issue of avoided deforestation credit trading”.

On the FCPF’s impact on indigenous peoples’ rights to land and
resources, NGO Forest Peoples Programme points out that:

* Proposed governance arrangements only allow input from indigenous
peoples on invitation and only on a no voting rights basis;

* Oversight for safeguard application is entrusted to the secretariat
and there is no allowance for a grievance or redress mechanism for
indigenous peoples;

* There is no commitment to uphold human rights and the charter does
not hold the Bank to meeting standards in the UN Declaration on the
Rights of Indigenous Peoples; and

* Plans to allow low-impact logging and plantation development in the
emission reduction programmes will mean business as usual.

Planned retroactive consultations with indigenous peoples on the
draft FCPF charter were to take place end February in Nepal, and in
early March in Mexico and Burundi.

FCPF draft information memorandum
http://ifiwatchnet.org/?q=en/node/7309

Carbon Sunk
http://www.rainforestfoundationuk.org/files/Carbon%20Sunk%20Report.pd
f

FCPF: Facilitating the weakening of indigenous peoples’ rights
http://www.forestpeoples.org/documents/forest_issues/fcpf_fpp_briefin
g_feb08_eng.pdf


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5. Camisea and the World Bank: A lost opportunity
COMMENT by César Gamboa; Derecho, Ambiente y Recursos Naturales

---------------------------------------------------------------------

In February, the World Bank’s International Finance Corporation (IFC)
approved a $300 million loan for the Camisea II liquefied natural gas
(LNG) export project in Peru (see Update 58). Even though
environmental, social and now economic concerns have been raised, the
IFC did not hesitate to provide a loan for the consortium managing
the project area known as Block 56, operated by Hunt Oil (Peru LNG).

In various communications, Peruvian NGOs have raised their concerns
with the IFC. The Camisea II project is part of a larger initiative
which began with Camisea I: it uses the same infrastructure (Las
Malvinas processing plant in Cuzco, pipelines traversing the Peruvian
Amazon, and a chemical separation plant in Paracas); will export gas
from Camisea I’s gasfields; and both consortiums have at least two
companies in common (US Hunt Oil and Spanish Repsol YPF). In effect
the operations of Camisea II (Block 56 operated by the Hunt Oil-led
consortium) will become indistinguishable from those of Camisea I
(Block 88 operated by the Pluspetrol-led consortium). Camisea II will
contribute to the accumulated impacts of Camisea I created by
extraction, transport and distribution. Solutions should have been
found to the problems of Camisea I before work began on Camisea II,
given that a hurried start could exacerbate problems and prevent
solutions being found.

The IFC’s due diligence was insufficient. It should have ensured that
all ‘associated facilities’ of Camisea I and II met its standards
even if it was not funding them directly (under Bank rules, loans are
not permitted to projects whose “associated facilities” breach
safeguard policies). The approval of this kind of loan could set a
dangerous precedent with regards to the implementation of the IFC’s
new lending performance standards. It has yet to be revealed how the
IFC applied the requirement to obtain “broad community support of
affected communities” both for Camisea II and its upstream gas
fields.

Despite the importance that the IFC places on the role of foreign
investment in Peru and its potential to improve the quality of life
of our citizens, the conditions for such improvements to occur have
still not been created. It is unclear whether the IFC has carried out
a cost-benefit analysis, worrying for a project of this scale and
given how essential it is for the energy security of the country.
According to the Engineering College of Peru, the project will
provide less economic benefit to the country than if the gas were
used for domestic consumption. Instead it provides a windfall for the
companies involved. The problems with Camisea II fall into three
categories:

Firstly, the original aim of the Camisea gas project was to ensure
long-term energy security by reducing dependency on imported petrol.
However in the end the decision whether to export the gas or use it
domestically was determined by corporate interests. There is no
systematic national energy strategy which considers the opinion of
those communities most affected by hydrocarbon development. There is
the real possibility that gas exports from the Camisea project could
damage the future development of Peru.

Secondly, the state lacks the capacity to ensure that revenues
generated by the project create sustainable development. The failure
to improve the quality of life at the local level has undermined one
of the main arguments to convince the local population of the
project’s merits.

Thirdly, the state lacks the capacity to adequately supervise and
monitor projects of this scale. This lack of capacity is evident from
the five leaks and overflows that have occurred in the first two
years of the project’s operation. These were caused by bad design and
implementation and were not detected by the responsible authorities.

It is not clear what benefits the IFC’s involvement will bring in
terms of improvement in the quality of life for indigenous
communities and those directly affected by the project. To insist on
the rushed implementation of Camisea II without first improving state
capacity to mitigate its impacts, safeguard the rights of indigenous
peoples, and oversee responsible actors will exacerbate the problems
of Camisea I.

César Gamboa; Derecho, Ambiente y Recursos Naturales; Lima, Peru
cgamboa@dar.org.pe


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6. Calls for Bank to uphold rights

---------------------------------------------------------------------

The UN human rights council held its seventh session in Geneva in
March, where a variety of reports were released calling for greater
accountability of the World Bank to international human rights law.

The January report of the UN High-Level Task Force on the right to
development concluded that “though the principles of the Paris
Declaration on Aid Effectiveness are consistent with human rights”,
it “does not adequately address the asymmetries in power”. According
to the report, ownership rests with the donor countries and the World
Bank, while developing countries have a limited voice. The report
also found a “lack of mutual accountability” and that the process
“can work against the right to development and erode national
democratic processes” (see page 6).

Margot Salomon from the London School of Economics concurred with
these findings in a paper which highlights ways in which World Bank
and IMF policy-based lending has violated human rights. Though IFIs
have begun to consider the place of human rights in their rhetoric
(see Update 53, 51), human rights accountability is missing from
their practice. Salomon outlines the difference between Bank support
to countries to uphold and protect their human rights
responsibilities, and its lack of accountability for the negative
impact that its economic policy prescriptions have on rights. She
states that executive directors of the Bank must comply with their
national and international human rights obligations in the policies
they pursue.

The March report of the UN Independent Expert on human rights,
economic reform policies and foreign debt, Bernards Mudho (see Update
55) outlines general guidelines for states and financial institutions
to ensure that “compliance with the commitments arising from foreign
debt does not undermine the capacity of states to fulfil their human
rights obligations”. His core recommendations include that:

* states define “country-specific minimum standards in the area of
economic, social and cultural rights”, which “must be coherent with
the provisions of international human rights law”;

* IFIs should harmonise their procedures with international human
rights law;

* human rights obligations should be harmonised across multilateral
organisations to avoid conflicting policy advice; and

* new tools such as human rights impact assessments, human rights-
based budgeting and accountability measures for IFIs should be
developed.

Mudho criticises the Bank-Fund debt sustainability framework which
fails to assess a country’s ability to meet its human rights
obligations while servicing its debt. Capacity to pay “should not be
assessed by primary financial parameters alone” and the regulatory
framework of international public finance must be improved to “take
into account the international human rights regime and innovative
analytical tools on debt sustainability”.

Jean Ziegler, the UN Special Rapporteur on the right to food refers
to “schizophrenia in the UN system and in states’ policies” as one of
the key obstacles to the promotion and protection of the right to
adequate food. He condemns the World Bank and IMF for their refusal
to recognise the existence of the right to food and finds that their
insistence on the privatisation of public utilities, the
liberalisation of agricultural trade, and market-assisted models of
land-reform “create catastrophic consequences”. They are also in
contradiction with the UN General Assembly resolution of December
2007 in which the Bank and Fund are asked to avoid actions that could
have a negative impact on the realisation of the right to food.

IFC: atoning for past violations?
---------------------------------
An IFC-funded research project on stabilisation clauses and human
rights by the office of the UN Special Representative on business and
human rights (see Update 57) finds that investment contracts often
discriminate against the ability of developing countries to uphold
their human rights and environmental commitments. Stabilisation
clauses are included in private contracts between investors and host
states to address changes in law in the host state during the life of
an investment project. On-going concerns over this issue arose in
2003 in relation to the IFC-funded Baku-Tblisi-Ceyhan pipeline (see
Update 47, 37). Civil society groups claimed that the clauses limited
the host states’ ability to implement human rights obligations.

The research covers a broad range of countries and industries,
including power, water, health care services and extractives.  One
category of stablisation clause is a "freezing clause", which
'freezes' the law of the host state with respect to the investment
project for the life of the project.  Findings include:

* no contracts from rich countries include freezing clauses;

* 83 per cent of freezing clauses are in the extractive sector;
and

* limited freezing clauses explicitly include labour law
changes.

The study’s recommendations include: benchmarking of human rights
standards at the outset of a project; analysis of how host-state
capacity and the skills of negotiators impact the design of
stabilisation clauses; and improving the transparency of contracts.
Multi-stakeholder consultations are planned imminently.

Report of UN High-Level Task Force on the right to development
http://www2.ohchr.org/english/issues/development/groups/docs/Draftrep
ortHLTF23012008.pdf

International economic governance and human rights accountability,
Salomon
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1013505

Reports of the 7th session of the human rights council, including by
Mudho and Ziegler
http://www2.ohchr.org/english/bodies/hrcouncil/7session/reports.htm

Research paper on stablisation clauses and human rights
http://www.business-
humanrights.org/Links/Repository/111788/link_page_view


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7. Palacio resigns: progress on rights?

---------------------------------------------------------------------

The resignation of World Bank general counsel Ana Palacio who will
step down mid-April has raised hopes that the Nordic Justice and
Human Rights Trust Fund (JHRTF), announced in mid-2006 may now move
forward (see Update 53). Palacio was appointed in June 2006 by former
Bank president Paul Wolfowitz in a move seen as reward for Spain's
support for the US invasion of Iraq. During her time at the Bank,
Palacio failed to move forward any human rights initiatives. In
October 2007 Nordic countries were prepared to finalise the JHRTF,
but new Bank president Robert Zoellick postponed the official
signing.

http://www.bicusa.org/en/Article.3697.aspx


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8. Rural electrification failing the poor

---------------------------------------------------------------------

A report by the Bank’s internal evaluation group on rural
electrification finds that only seven per cent of Bank rural
electrification projects have an explicit poverty reduction
objective. Though renewable energy technologies are becoming cheaper
and more available, “the full benefits of providing electricity to
the poor are not being met” and households that benefit the most from
rural electrification are non-poor. The Bank promotes an approach
which favours communities nearer to the existing grid as a “least-
cost” option. The study stops short of drawing the conclusion that
public subsidies are needed to enable the poor to access electricity.

http://www.worldbank.org/ieg/electrification


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9. Bank powerless to end Chad abuses

---------------------------------------------------------------------

Chadian president Idriss Déby has used February’s failed coup attempt
to clamp down on critics of the Bank-supported Chad-Cameroon
pipeline. Leading opposition legislator, Ngarlejy Yorongar, who led a
complaint to the Bank’s Inspection Panel in 2001, was arrested by
security forces though later managed to escape to Cameroon.  Delphine
Djiraibe who has challenged the government and the Bank to live up to
commitments to use the country’s oil revenues for poverty reduction
fled to Europe. The Bank has promised to address development
objectives “once it’s possible to have discussions with the
government”, but has backed down when Déby has diverted oil profits
to the military.

http://www.bicusa.org/en/Article.3693.aspx


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10. Sri Lankan small farmers slam World Bank

---------------------------------------------------------------------

Local farmers and agriculture activists in Sri Lanka have slammed
World Bank intervention in the agricultural sector, saying it has
caused the eradication of small-scale cultivation and resulted in
high food prices, in particular rice and wheat. The Movement for
National Agriculture and Land Reform (MONLAR) held a gathering for
concerned parties to discuss possible solutions to the problem.
Former minister Indika Gunewardena stated that tenant farmers will
never be able to rise out of poverty as long the government retains
ownership of the land they work on. Small-scale farmers state that
the Bank has been encouraging companies to invest only in large-scale
farms.

http://www.geocities.com/monlarslk/


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11. Inside the institutions The World Bank and health

---------------------------------------------------------------------

In the last five years the global system for channelling development
finance to the health sector has changed radically. Assistance for
health has shot up from $6 billion to $14 billion, most of which is
being provided by new players such as the Global Fund for AIDS,
Tuberculosis and Malaria (GFATM), new bilateral funds and private
actors like the Bill and Melinda Gates Foundation. This has caused
the Bank to seriously re-examine its role in health finance.

The World Bank puts its work on health and health systems together
with its work on nutrition, population and family planning issues.
Work that affects public health is also carried out in other parts of
the Bank, for example the water and sanitation department.

The health, nutrition and population (HNP) unit sits within the Human
Development network of the Bank. The strategy for the unit was
rewritten in 2006 and 2007 and finally agreed by the board end April
2007 after controversy over the support to reproductive rights (see
Update 56). The new strategy has four overarching objectives: improve
the level and distribution of key health outcomes, outputs, and
system performance; prevent poverty-related illnesses; improve
financial sustainability in the health sector; and improve
governance, accountability and transparency in the health sector.

The strategy seeks to address three main challenges facing work in
health: the need to ensure that financing creates tangible results on
the ground; the need to strengthen health systems; and the need to
reduce duplication and increase coherence of health financing given
the increase in actors on the international health scene. The Bank
believes its greatest comparative advantages in undertaking health
work are in health system strengthening and inter-sectoral approaches
to country assistance as well as macroeconomic policies and capacity
to enable large scale implementation.

A count of World Bank professional staff working in the sector in
mid-2006 showed that health was the fourth biggest area with 206
people. This is only behind economic policy (349), rural development
(309) and the environment (255). However this is 23 per cent below
the HNP’s peak staffing level in 1998.

Over the course of the previous strategy (1997-2007) the World Bank
funded more than 500 projects with a health component in over 100
countries. That meant $15 billion in commitments though just over $12
billion actually disbursed. At the end of the 2006 fiscal year the
portfolio of active projects totalled $7 billion, a decrease from the
2001 high of $9.5 billion. In fiscal year 2007, IDA and IBRD lent 11
per cent of its portfolio to projects with health and other social
sector components. This $2.75 billion is a 20 per cent decline from
peak lending in 2003. In IDA countries, health sector lending was 16
per cent of the total.

In terms of regional breakdown, in 2007, South Asia accounted for 44
per cent of new commitments with health components while Latin
America and the Caribbean was 32 per cent and the African region was
14 per cent. The largest theme in 2007 was health systems lending (27
per cent of new commitments). This is followed by injuries and non-
communicable diseases – including a variety of work from tobacco
control to road safety and indoor air pollution projects – at 17 per
cent and child health at 14 per cent.

The new HNP strategy recognises that the World Bank’s health work has
been comparatively ineffective. The HNP lending portfolio had the
lowest performance of all sectors for five years in a row from 2001
to 2006. Only 66 per cent of completed HNP projects between 1997 and
2006 were rated ‘satisfactory’ or better. A planned 2008 evaluation
of health sector work by the Independent Evaluation Group (IEG) will
be a key method for remedying these problems.

The Bank’s direct HNP work may be suffering from declining staff and
lending, but the HNP team also serves as the secretariat for a
burgeoning number of trust funds related to health. Sixteen such
trust funds, with governance and allocation rules set by donors, are
hosted by the HNP unit, not to mention regional and country specific
trust funds that also finance the health sector. Donors have
committed $275 million for the 16 funds such as Human Resources for
Health Capacity Building and the Global Program to Eradicate Polio.

The Bank’s private sector arm, the International Finance Corporation
(IFC) has also increased its work in health. According to the IFC
health strategy: “the reliance solely on the public sector to address
these major challenges appears to be no longer a viable or
sustainable option in the long term because of fiscal constraints.”
From 2000 to 2007, the IFC provided $536 million in financing to 47
private health care projects in 25 countries. However in December the
IFC announced plans to manage a new $1 billion fund for private
health care providers and private health care systems in Africa (see
Update 59).

Health, nutrition and population unit
http://www.worldbank.org/hnp

IFC health sector strategy
http://www.ifc.org/ifcext/che.nsf/content/strategy


===================================================================

12. Training for nothing? IFIs asked to surrender reins over capacity
    building

---------------------------------------------------------------------

The World Bank’s Independent Evaluation Group (IEG) revealed serious
shortcomings in the applicability of the Bank’s training work. It
published its report on the Banks’ project-based and central training
programmes that are supposed to build capacity for development in
February. The Bank has provided around $720 million annually for
training programmes in the last ten years, though training is only a
portion of the Bank’s overall technical assistance (TA) work.

The IEG conducted surveys in six countries and field studies in
another four on trainings and  revealed that “only about half
resulted in substantial changes to workplace behaviour or enhanced
development capacity.” It found that there was a lack of attention to
the application of newly learnt knowledge and a lack of training
targeted at participants’  needs.

Incentives for participants to apply their knowledge as well as
incentives for employers to rely on new knowledge were low. The IEG
found that “the Bank does not adequately monitor or evaluate training
results.” It noted that the World Bank Institute lacks the ability to
assess capacity gaps and does not engage in direct consultation with
clients on their requirements.

The IEG made three recommendations: develop clearer guidelines and
quality standards for training programmes; make training experts
available to staff and borrowers before the design of programmes; and
clarify the World Bank Institute’s training mandate.  Management
committed to draft guidelines for training design and circulate a
roster of training experts before July 2008; but did not give any
indication of how it would ensure implementation of new guidelines.
It put off consideration of reforms to the World Bank Institute until
the Bank finishes developing the knowledge component of its long-term
strategy (see page 11).

NGO ActionAid International has set out a detailed critique of TA
arguing that while constituting between a quarter and a half of aid,
it has largely been ineffective, over-priced, donor-driven and based
on an outdated model of development. Elvira Groll of ActionAid UK
said: “We have repeatedly called for a strong alignment of capacity
building programmes to national and local needs and priorities in
order to actually have any impact. As this evaluation shows, the
World Bank is really failing to deliver.”

Those same critiques are finding a new target in the IMF, which has
announced plans to start charging for its TA work (see Update 59).
Peter Gakunu, the IMF executive director representing anglophone
Africa wrote, “The likely outcome could be a trade-off between
financing critical social spending and paying for TA. For countries
that cannot afford to pay for TA, this would adversely affect their
efforts to develop their institutional and human capacities. While
the proposal to rely on donor funding for TA may help alleviate the
financing burden, it will also imply that the Fund is competing for
donor resources with its members.”

While Gakunu argues for the Fund to continue providing TA free of
charge to low-income members, some civil society organisations have
argued for a more recipient-owned approach that lets countries choose
how to use aid resources. In evidence submitted to a UK parliamentary
inquiry on aid effectiveness, the Bretton Woods Project recommended
that “funding to pay for TA should be routed through country
procurement systems. Recipient countries should be free to choose
which TA projects they want and who will undertake the project.”

Using training to build capacity
http://www.worldbank.org/ieg/training/

Real Aid 2: Making technical assistance work, ActionAid International
http://www.actionaid.org.uk/doc_lib/real_aid2.pdf


===================================================================

13. Bank both player and referee in road to Accra
By Lucy Hayes, Eurodad

---------------------------------------------------------------------

The Africa Cup of Nations has ended, but Ghana will host two other
international events this year: the UN Conference on Trade and
Development quadrennial conference in April and the High Level Forum
on Aid Effectiveness in September. On aid effectiveness the World
Bank is both player and referee, prompting cries of foul play by
civil society groups. The Bank is heavily involved in the process of
monitoring commitments and is very present in the run-up to the Ghana
meeting.

The Organisation for Economic Cooperation and Development (OECD) High
Level Forum on Aid Effectiveness will review progress against the
2005 Paris Declaration and make commitments in areas where more needs
to be done. The World Bank has signed up to the 56 commitments and 12
targets to be reached by 2010, agreed to by most donors and many aid
recipient governments. The 2006 baseline survey to monitor progress
shows that the World Bank scores relatively well in some areas
compared to other donors, such as providing budget support or
“programme-based” aid. It is only slightly better than average at
disbursing money on time, and using developing country financial
systems. And it does less well when it comes to providing technical
assistance and coordinating missions to the country.

The rules of the Paris Declaration game are favourable to the Bank.
Despite being a player, the World Bank also gets to be the referee on
three targets. These are the targets related to public financial
management, ownership and results. Despite the influence of the Bank,
particularly in the latter two areas, its own actions avoid scrutiny.

The Bank’s controversial scoring system, known as Country Policy and
Institutional Assessments or CPIA (see Update 52), is used to measure
the quality of developing countries’ public financial management
systems. This is assessed using the results from one CPIA score,
namely the “quality of budgetary and financial management”.

The second target assessed by the Bank is ownership. This is viewed
as developing countries exercising effective leadership over their
development policies, strategies, and coordinating development
actions. The indicator and process for measuring success is circular
at best. Developing countries are scored by how operational their
Poverty Reduction Strategy Paper (PRSP) is as judged by the Bank. No
country scores the top grade of having a “sustainable” PRSP, and 8
out of 62 countries are deemed to have “developed” PRSPs. There is no
indicator to measure what the Bank (or other donors) should do to
enable country ownership, such as ending policy conditionality.

The third area measured by the Bank is particularly problematic. This
is the extent to which aid is implemented in a way that focuses on
the desired results. Although both donors and developing countries
have made commitments to pay more attention to the results of their
interventions, the indicator for measuring progress refers only to
efforts of the developing country, as judged by the Bank.

Using a review of its 2005 Comprehensive Development Framework
progress report, the Bank examines the quality of developing
countries’ performance assessment frameworks - based on the quality
of statistical data available, stakeholder access to information and
coordination of monitoring and evaluation. The Bank, together with
other donors, plays a leading role in deciding the conditions and
indicators in these performance assessment frameworks, and often in a
non-transparent way. It is ironic that the Bank can then make a
judgement on their quality. No country was awarded the top score, and
only Tanzania, Uganda and Mozam­bique made the second grade.

A new Eurodad report, Turning the Tables, showcases civil society and
southern government views on aid effectiveness. It argues: “The
current monitoring process for the Paris Declaration is asymmetric -
donors monitor themselves, while recipients are monitored by the
World Bank and others.” CSOs from around the world are mobilising to
make aid more effective, with over 380 organisations from over 80
countries having signed up to a civil society position paper Better
Aid: A civil society challenge to the 2008 Accra High Level Forum on
Aid Effectiveness.

Meanwhile, negotiations are underway to agree the text of the
communiqué that development ministers will announce in Accra as the
outcome of the conference - the Accra Agenda for Action. Developing
countries have outlined six priorities - conditionality, capacity
development, incentives for good performance (for donor agencies),
division of labour/complementarity, predictability and untying aid.
The Bank says in principle that it agrees with these six proposals -
the devil is of course in the details of how they are addressed. Some
donors want to ensure that no detailed pledges are made, just vague
discussion on identifying “good practice principles”. Others are
pushing for agreement on concrete actions.

The Bank sits in a pivotal position on the executive committee for
the High Level Forum, together with representatives from the OECD and
the government of Ghana. The Bank managed to rile both its team
members and the other side in June last year by unilaterally
producing a “zero-draft” of this communiqué, kicking the ball into
play before the whistle was blown. The game was restarted, but it
remains to be seen how much developing countries will be able to get
or keep possession of the ball in the lead up to the Accra event.

Turning the tables, Eurodad
http://www.eurodad.org

Better Aid
http://www.betteraid.org/index.php?option=com_content&task=view&id=
88&Itemid=26

The Paris Declaration on Aid Effectiveness and the Right to
Development, Roberto Bissio
http://www.betteraid.org/downloads/A-HRC-8-WG-2.2-TF-CRP7.pdf


===================================================================

14. Rebuke for UK's World Bank love affair

---------------------------------------------------------------------

The UK’s International Development Committee has sharply reprimanded
the Department for International Development for its decision to hand
over a 50 per cent increase in funding for the World Bank without
sufficient analysis of whether or not this is good value for money.
The report contains sharp analysis of the Bank’s failure to use
impact assessments; its continued use of conditionality; and the
British government’s lacklustre efforts to bring democracy to the
Bank. The committee has called for a “greater weight of subsidies for
clean, renewable energy and less for extractive industries and this
rebalancing should be happening at a faster rate”.

http://brettonwoodsproject.org/idcreport


===================================================================

15. New World Bank financial products

---------------------------------------------------------------------

In March the Bank approved a new lending facility, the Catastrophe
Risk Deferred Drawdown Option, to give middle-income countries
immediate access to up to $500 million in the event of a natural
disaster. Countries qualify if they have a hazard risk management
programme monitored by the Bank. The fund is to have fewer
conditions, longer maturities and be cheaper than previous similar
facilities which have languished unused. Bond fund management company
PIMCO has been selected by the Bank to manage its $5 billion Global
Emerging Markets Local Currency Bond Fund, to assist countries to
build local currency bond markets (see Update 58).

http://treasury.worldbank.org/Services/Financial+Products/


===================================================================

16. Venezuela v. Exxon back to ICSID?

---------------------------------------------------------------------

Venezuela has asked Exxon Mobil to go back to the Bank’s
International Centre for the Settlement of Investment Disputes
(ICSID), and drop lawsuits filed in courts in London and New York.
The lawsuits stem from the nationalisation of a heavy-crude oil
project in Venezuela in which Exxon Mobil owned a majority stake.
Injunctions obtained in the London and New York courts hadresulted in
$12 billion in Venezuelan assets being temporarily frozen.
Venezuela’s Congress called for pulling out of ICSID, following the
lead of Ecuador and Bolivia (see Update 58). Venezuelan minister of
energy Rafael Ramírez has vowed to stay in ICSID and fight.

http://www.iisd.org/investment/itn/


===================================================================

17. Slaughtering the Amazon

---------------------------------------------------------------------

In the past three years Brazil’s National Development Bank (BNDES)
and the World Bank have poured funds into the cattle industry in the
southern Amazon. “While governments insist they are doing their
utmost to stop deforestation they have been putting in place
incentives for the destruction of the forest,” said Roberto Smeraldi,
head of Friends of the Earth Brazil and co-author of a new report The
Cattle Realm. The IFC gave $9 million to Brazil’s leading beef
processor to upgrade its slaughterhouse operations in the Amazon (see
Update 55), despite an environmental study showing that the expansion
would lead to the loss of up to 300,000 hectares of forest.

http://www.amazonia.org.br/arquivos/259673.pdf

===================================================================

18. Europe questions IFI conditionality: whose outcome?
By Nuria Molina, Eurodad

---------------------------------------------------------------------

A new report shows that IMF structural conditionality did not decline
in the five years after the approval of the Fund’s conditionality
guidelines. With little progress at the World Bank, many wonder
whether the European Commission's new approach is what is needed.

A forthcoming briefing by Eurodad, which uses the Fund’s own
conditionality data, finds that IMF loans carry an average of 14
structural conditions each. These are conditions spelling out policy
reforms to the structure of a borrower’s economy, such as
privatisation. Sensitive policy reforms – including privatisation and
liberalisation related conditions, as well as other conditions
prescribing regressive taxation, or constraining the fiscal space
available to recipient governments – comprise a third of the IMF
structural conditions and their number has not declined.

The Fund continues to push conditions in areas beyond its core
mandate of monetary policy, public financial management and financial
sector soundness. These non-core areas include state-owned enterprise
reform and privatisation, social policies, civil service reform, or
regulatory reform. Eurodad estimates that nine per cent of IMF
structural conditions are privatisation-related, and 11 per cent are
privatisation and liberalisation conditions in the banking and
financial sector.

Then IMF president Horst Koehler wrote to IMF senior management in
September 2000: “I am personally convinced that there is substantial
scope to streamline and focus our conditionality, both to reinforce
country ownership of the programmes which the Fund supports and as
part of our overall efforts to focus the work of the Fund on its core
areas of competence”. This call culminated in the approval of new
conditionality guidelines in September 2002, which committed the IMF
to the principles of ownership and criticality in its application of
structural conditionality, as well as to streamlining the number of
conditions (see Update 32). Over seven years later it seems that
these recommendations from the top have been more honoured in the
breach than in the observance. A recent report of the IMF's
Independent Evaluation Office confirms that progress in implementing
the conditionality guidelines has been limited (see Update 59).

The World Bank is not doing any better. Even if the Bank claims to
have reformed its conditionality policy, Eurodad analysis published
in November found that more than two thirds of loans and grants from
the Bank’s International Develop­ment Association (IDA) still had
sensitive policy reforms attached (see Update 58). The majority of
these were privatisation-related conditions.

In light of these findings, European civil society demanded their
government’s contributions to IDA were made contingent on further
progress on the implementation of the Good Practice Principles on
conditionality. Disappointingly, the final report of the IDA
negotiations published in March welcomes “progress under the Good
Practice Principles on conditionality” and management’s proposal to
further review application of conditionality as part of the internal
review of Development Policy Operations. There is no mention of calls
from civil society and some shareholder governments for an
independent review of the Bank’s use of conditionality.

Policies or outcomes?
---------------------
The European Commission (EC) has introduced a new approach to
conditionality, one which is garnering increasing attention across
Europe and in Washington. The EC says it will emphasise conditions
focussing on “outcomes” rather than on policies. This means that
governments negotiating a programme with the EC can propose
objectives they would like to reach, rather than commit to
implementing specific policies. As long as the government makes
continued progress towards these objectives the EC will continue to
provide its aid money, often as budget support.

A Eurodad study launched in February compared this new EC approach
with the results frameworks that have been announced in recent years
by the World Bank and IMF. The report shows that the World Bank and
the IMF’s treatment of the term “results” goes well beyond that of
the EC, which largely looks at on the ground poverty reduction and
human development improvements. The World Bank uses the term to refer
to the proximate results of policy actions as well as results for
people on the ground. An example for Tanzania is the requirement to
improve its ranking in the World Bank’s controversial Doing Business
index (see page 12). The Commission, by contrast, focuses on results
such as increasing net school enrolment rates and has, to a large
extent, phased out economic policy conditions from their aid which is
channelled to poor countries as budget support.

Tracing government responsibility for successes and failures in
education, health and other sectors is a challenge, recognised in
Commission reports and assessed in the Eurodad study. It is hard to
find reliable baseline or annual data, and when shocks occur it is
debatable whether the government should be blamed for slower
progress. Some developing country decision-makers fear that outcome-
based conditionality might make them responsible for results which
are out of their hands. In this regard, the Malawian minister of
finance Goodall Gondwe said “outcome indicators are not in the hands
of the government and they are very difficult to achieve.”

The EC seems to lack the courage of its convictions with its new
instrument. It is using it only to disburse about two to three  per
cent of its overall budget support. The rest of its finance is still
linked to more traditional policy conditions. From a recipient
country’s point of view little has changed. “Donors come along with
new formulas every now and then, and after a few years these fade
away and they come with new ones … But it is always about their
agendas, not necessarily ours” says civil society activist Deus
Kibamba of the Tanzania Gender Networking Programme. Governments
still face policy conditions and now have to get used to outcome
conditions as well. An EC official quoted in the Eurodad report was
forced to admit that ”there is now more conditionality than in the
past.” This was also validated by the report’s analysis of the EC’s
pilot operations in Burkina Faso and Mozambique.

Citizen groups will continue to demand a reduction in conditions but
also transparency in how money is spent and information on whether it
is helping countries reach the Millennium Development Goals. The EC’s
attempt to break ranks with the Washington-based institutions is
still tentative, but provides an opportunity to test out and debate a
new approach.

The World Bank certainly seems to be on notice. At a recent launch
event for the Eurodad report in Brussels, Manuela Ferro, country
economics manager in the Bank’s Operations Policy and Country
Services department, made a ten minute intervention and engaged in
lively debate with the EC official at the table. Ferro insisted on
the ‘official’ World Bank arguments for being reluctant about this
new approach: the problem of attributing poverty reduction results to
the action of the government, the lack of data to measure results,
and the fear of leaving developing countries to their own fate if
multilateral institutions withdraw their “valuable policy advice”.
Surprisingly, the World Bank and some European countries, while
expressing doubts about the merits of this new approach, proved to be
more open than in the past.

Final IDA 15 report
http://www.worldbank.org/ida

Outcome-based conditionality too good to be true?, Eurodad
http://www.eurodad.org/uploadedFiles/Whats_New/Reports/Outcome_based_
conditionality.pdf


===================================================================

19. IFIs foot dragging on key debt issues
By Nancy Dubosse, Afrodad

---------------------------------------------------------------------

The World Bank and the IMF are struggling to catch up to global
debates on ‘odious’ debts and responsible financing; have failed to
take action on vulture funds; and have been dragging their feet on
debt relief programmes for Haiti and Liberia.

The World Bank released a draft report on ‘odious’ debt (defined as
loans knowingly given to a despotic power to repress and not benefit
its people) in September 2007 (see Update 57). While the report
conceded that there is “factual analysis of the irregular
transactions and the consideration that the lender knew of the use of
the funds”, there was no agreement that this was a useful way to
classify sovereign debt nor were there any recommendations for what
to do about odious debts.

Debt campaigners were asked by the Bank to respond to the paper. It
was not clear what purposes their response would serve, and so the
two sides have been in dialogue over how to take the process forward.
A roundtable discussion is planned for the WB-IMF spring meetings in
April in Washington.

While debates over odious debts have looked back at lenders’ past
practices, the question remains how to prevent such behaviour in the
future. Brussels-based network Eurodad has contributed towards this
end by creating a Charter on Responsible Financing, which attempts to
move away from institution- or sector-specific responses to concerns
over responsible lending and fair resolution of debt crises towards
“internationally recognised legal standards for responsible lending
and borrowing”.

In addition to technical and legal terms and conditions, the charter
addresses the protection of human rights and the environment, public
consent and transparency, procurement, and repayment difficulties or
disputes. On the thorny issue of human rights, the charter stipulates
that activities financed must not violate rights as set out in the
treaties to which either borrowers or lenders are signatories.
Similarly, financing must not contravene internationally accepted
minimum standards on social, labour and environmental protection.
These include the Bank's safeguard policies, the IFC's performance
standards, and the ILO's core labour standards.

This is a key distinction of the charter from G20 discussions on a
responsible lending charter.  The G20 charter, largely driven by rich
country fears about the growth of lending by China and India, has
reportedly been opposed by Brazil, China and South Africa.  A revised
text is to be discussed at the next G20 meeting in Brazil in
November.

Eurodad has called on governments and donor agencies to voluntarily
adopt their charter, and for debate on the issues to take place as
part of the UN Financing for Development process which next meets in
Doha in November.

Afrodad has launched the Fair and Transparent Debt Arbitration
Campaign, which aims to gather and disseminate evidence on cases of
illegitimate and odious debt through­­out the world, with a view to
the establishment of a transparent arbitration mechanism. Afrodad has
already compiled ten dossiers, including Nigeria, Cameroon/Chad,
Argentina, and the Philippines. Afrodad is organising national
meetings in Nigeria and DRC in April 2008 to inform both local civil
society groups and parliamentarians.

Vulture watching
----------------
To date, eleven countries which are graduates of the Highly Indebted
Poor Countries (HIPC) initiative have been targeted by so-called
‘vulture funds’ (currently Uganda, Nicaragua, Sierra Leone, Niger,
and Zambia are being targeted). These companies buy up ‘bad’ debt at
a discount, and then attempt to recover the full amount, often by
suing through the courts. The commodification of public debt,
particularly from countries that have been party to debt relief
discussions, gives an opportunity for vulture funds to be free-
riders, as they are profiting from the fiscal space created by debt
relief and from loans given for development purposes.

In January, Belgium set a precedent by passing a resolution to
“safeguard development cooperation and debt relief from the actions
taken by vulture funds”. The legislation translates into clauses
being inserted into future bilateral agreements preventing these
funds from taking advantage and urges the IFIs to ensure that debt
relief initiatives are binding for all parties.

In 2001, the IMF released a briefing on private sector involvement in
international finance entitled Resolving and preventing financial
crises. The brief concedes that vulture funds create a disincentive
for creditor nations to participate in debt restructuring by
providing an additional avenue through which to recoup part of their
lending. As an organisation that has the ears of the world on
macroeconomic stability and public financial management, the IMF
should be able to adopt a concrete policy proposal on the issue of
vulture funds, particularly with respect to their activities in HIPC
countries.

For its part, the World Bank has failed so far to respond to debt
campaigners’ call for the expansion of the International Development
Association’s (IDA) debt reduction facility. The facility enables
countries going through HIPC to buy back their commercial debts at a
discount, preventing vulture funds from getting hold of them.

HIPC updates: Haiti and Liberia
-------------------------------
The link between external debt and development has never been more
pronounced than in the case of Haiti. Debt relief of $1.2 billion
($464 million of which is owed to the World Bank) has finally been
granted conditional upon completion of the HIPC programme. The cost
of not meeting the conditions of debt relief by the 2009 deadline is
estimated at $44 million. From a development perspective, the key
issue is the opportunity cost of delayed debt relief and current debt
servicing while Haiti is going through the HIPC programme.

Liberia has $4.7 billion in external debt, of which $1.6 billion is
owed to multilateral institutions. In March, after several delays,
the IMF finally granted Liberia decision point status and committed
$952 million in financing. Liberia is currently under an IMF Staff-
Monitored Programme to strengthen its public financial management
systems. It took Liberia two years to get to this point, and it can
not hope to be relieved of its debt until it has implemented a
Poverty Reduction and Growth Facility arrangement for one year.

Charter on responsible financing
http://www.eurodad.org/whatsnew/reports.aspx?id=2060

Jubilee Zambia vulture fund campaign
http://www.jctr.org.zm/vulturefund.html

Belgian Senate resolution on vulture funds
http://www.senate.be/www/?MIval=/publications/viewPub&BLOKNR=1&COLL=
S&LEG=4&NR=244&PUID=67109457&LANG=fr


===================================================================

20. The IMF in Argentina: the search for relevance
By María José Romero, Choike

---------------------------------------------------------------------

Since Cristina Fernández de Kirchner assumed the Argentinian
presidency in December the Fund has been involved with the
renegotiation of Argentinian debt with the Paris Club and a
controversy over official statistics.

The Paris Club of rich country creditors has failed to conclude debt
renegotiations with Argentina since 2005. The club requires borrowers
to have a programme with the IMF, which Argentina has steadfastly
rejected. In December IMF managing director Dominique Strauss-Kahn
visited Argentina and expressed the Fund’s readiness to cooperate but
advised that the best option is for the Paris Club to waive its
requirement of the IMF’s endorsement of the Argentinian economy. The
Paris Club has not moved on this recommendation, blocking any
possibility of agreement.

Meanwhile, the IMF is investigating the Argentinian inflation index
to determine whether the country violated international statistics
standards. In a letter to the government, the director of the IMF
statistics department, Robert Edwards, suggests that the indicators
that go into calculating inflation may have been temporarily amended.

He demands that Argentina inform the Fund of any change envisaged for
the measurement of inflation and indicate the reason for the change.
Predictably, the Argentine government has rejected this attitude.

In early March, the Fund’s Argentinian executive director Héctor
Torres informed his government that the IMF intended to strongly
censure the country in its flagship publication, the World Economic
Outlook, to be launched in April. Ultimately the IMF decided to
postpone a formal, public critique and used the government’s
inflation figures in the report. The Argentinian government sees this
as an attempt by both local financial circles and the IMF to
undermine the president’s credibility. According to vice president
Julio Cobos, “these [criticisms] are assessments of the institution;
we could also criticise the policies that the IMF has recommended
throughout its history, since many of them affected us, yet we
maintain prudent reserve in our words”.


===================================================================

21. World Bank and procurement: Development tool or TNC sop?

---------------------------------------------------------------------

A new study on procurement reform suggests that the World Bank's
narrow focus on value for money may undermine the ability of
governments to use procurement as a tool for development; meanwhile
US and European corporate lobbyists continue to pressure the Bank to
go slow on the use of developing countries' own procurement systems.

Procurement refers to the purchasing, leasing, or renting of
materials, services, or equipment by government agencies. The Bank
plays a lead role in procurement reform, arguably the most
controversial of so-called ‘good governance’ reforms. Countries like
Afghanistan, Bangladesh, Ghana, Peru, Rwanda, Sierra Leone, Tanzania
and Uganda have all introduced new procurement legislation since 2001
in response to World Bank conditions.

Government procurement accounts for approximately 4.5 per cent of
developing countries’ gross domestic product and governments tend to
be the largest single consumers of goods and services in most
countries. Globally, government procurement is big business, with
annual spending estimated at more than $2 trillion. This, along with
the fact that government procurement is the most significant sector
excluded from multilateral processes, explains why procurement is
increasingly on the agenda of trade negotiations.

In the past, substantial trade liberalisation commitments were
secured through World Bank conditionality rather than (or prior to)
trade agreements. A new report from UK NGO Christian Aid has found
that whilst procurement reform is counted as a governance reform, the
model favoured by the Bank is “biased to open competition that
facilitates market access for foreign firms”. In Ghana and Sierra
Leone there have been specific demands by the Bank to allow foreign
firms access to contracts.

The Bank is not pushing full liberalisation. Recipients retain some
policy flexibility to favour local firms. But the Bank is far from
promoting procurement as an economic development tool largely because
it retains a very narrow focus on efficiency and value for money.
Many countries in their economic development have used procurement
rules to favour local producers (most notably the US through the ‘Buy
American Act’) but the consistent message received by recipients is
that such policies limit competition and thus efficiency.

Ironically, whilst putting a great deal of legwork into reforming
procurement systems to get them aligned with international best
practice, the World Bank is itself dragging its heels on using those
systems. The targets of the Paris Declaration on Aid Effectiveness
(see page 6) commit donors to using country procurement systems,
recognising that it is counter-productive for a recipient with poor
administrative capacity to follow the different procurement
regulations of their various donors.

Of course, donors are not likely to start using recipient procurement
systems until they are safe in the knowledge that they are robust and
the risk of money going astray is limited. But the best practice
model they use is riddled with assumptions about the benefits of open
competition. Whilst allowing some preferences to local firms, the
indicators developed by the Organisation for Economic Co-operation
and Development (OECD) and the World Bank reward non-discriminatory
procurement systems with higher scores, as exclusions “may
arbitrarily limit competition and may result in inefficient
procurement and higher prices”. These criteria are used to measure
the robustness of country procurement systems, a goal in the Paris
Declaration.

Use of country systems
----------------------
The other relevant Paris goal is for donors to actually use these
reformed procurement systems. Recently the World Bank had a
consultation on its pilot programme on the use of country procurement
systems. It proposed weighting certain OECD-World Bank criteria more
highly to evaluate whether they could risk using country systems. The
weighting made it highly unlikely that a low-income country with weak
administrative capacity would be selected as a pilot country.
Indicators focusing on allowing participation of bidders regardless
of nationality were among those weighted more highly. As a recent
internal Bank document states, “the Bank must ensure that there is a
fair and level playing field for foreign firms to participate under
procurement processes that are expected to attract international
competition.”

The Bank’s Use of Country Procurement Systems initiative has drawn
extensive fire since it was first proposed in 2005, not least from US
and European corporate lobbies fearful of losing contracts if
national competitive bidding (NCB) systems replace the Bank’s
standardised international competitive bidding rules. International
firms typically do not compete well under NCB systems: between
2001-2006 firms from G7 countries won only 0.1 per cent of NCB
tenders as recorded in the World Bank’s procurement database.

The US administration opposes the Bank’s country systems proposal.
The US Congress, urged on by US corporate lobbyists, has threatened
to withhold portions of the US contribution to the International
Development Association (or IDA 15, see Update 59) if the initiative
goes forward. Furthermore, as public procurement processes are often
rife with corruption, international business and some civil society
groups have cautioned that use of country procurement systems
requires extensive monitoring and oversight.

The Bank has scaled back its initiative and is now proposing to pilot
the use of country procurement systems in eight to ten countries.
However, the pilots would entail a complex process of assessing
equivalence of a country’s systems with the “principles” of Bank
procurement policies, closing any gaps between the two, and judging
country capacity and compliance in following their own regulations.
The pilots would most likely prove to be costly and intrusive
affairs.

The Bank favours a standard procurement law and system rather than
developing a reform that can be adapted to be appropriate to each
country context. Following complex new procurement rules places a
heavy burden on governments, including the major spending ministries.
According to the Christian Aid report, local governments in Zambia
and Ghana have been particularly affected, because they do not have
access to the professionals (such as engineers and procurement
consultants) required to make procurement decisions. Local
organisations in Ghana argue that procurement reform has run counter
to the drive to decentralised governance - surely a more fundamental
goal for long-term poverty reduction.

Olivia McDonald of Christian Aid says procurement reform “should be
designed to be locally appropriate and focus predominantly on how
procurement decisions can be scrutinised by and accountable to poor
men and women as well as businesses involved in the contracting
process. The focus on who is eligible to bid can distract attention
from this fundamental goal as well as undermining the perceived
legitimacy for the Bank engagement in this sector”. There is an
important role for the Bank and other donors to help recipients share
best practice on procurement policy – however the decision on how far
to open up to foreign firms should reside with recipients themselves.

Christian Aid has urged that the issue be addressed as part of the
Accra aid effectiveness ministerial in September (see page 6): “The
current emphasis on liberalisation runs the risk of undermining the
legitimacy of this important process”.

Buying power: Aid, governance and public procurement, Christian Aid
http://www.eurodad.org/uploadedFiles/Buying%20Power.pdf

World Bank website for country procurement systems
http://go.worldbank.org/KB821V1XI0

Programme conditions, project safeguards: Quo vadis World Bank?
http://brettonwoodsproject.org/responsibleatissue57


===================================================================

22. A taxing agenda for the IMF
By Alex Wilks and Marta Ruiz, Eurodad

---------------------------------------------------------------------

The irony of the IMF giving a passing grade to Liechtenstein on money
laundering in the same month that Germany launches a massive
investigation into tax evasion based in the Alpine country shows that
the Fund has a lot of work to do if it wants to help clamp down on
illicit flows. Zambia may be showing the way for poor countries.

The concern that the Fund is giving cover to dubious government
practices was clear during the Liechtenstein scandal that first
emerged in February. After arresting high-profile suspected tax
dodgers, Germany pressed Liechtenstein to take action, saying it was
undermining its budget by facilitating tax evasion. At the launch of
an IMF report on his country in early March, Liechten­stein prime
minister Otmar Hasler picked out the positive messages – that “the
praise by the IMF shows that we are on a successful path of reform”
and that “most of the IMF’s recommendations will be taken up in our
implementation of the Third EU Money Laundering Directive, which is
imminent”. In fact the IMF report found “discrete and flexible legal
structures, strict bank secrecy and favourable tax arrangements”.
Some 90 per cent of the country’s financial business is from abroad
and “by its nature, Liechtenstein’s financial sector business creates
a particular money laundering risk”.

UK parliamentarians pressed IMF managing director Dominique Strauss-
Kahn about the potential for the Fund to better police tax havens
during his mid-March visit to London. Strauss-Kahn was reportedly
wary of the IMF becoming more involved, saying that the Fund must
stick to the mandate given by shareholders. That mandate includes the
Fund surveillance programme Reviews of Standards and Codes (ROSCs),
which are assessments of countries’ financial systems including on
anti-money laundering and countering the financing of terrorism (see
Update 54).

Criticism of the ROSC framework has come from campaigners in the Tax
Justice Network (TJN) (see Update 49). On their blog they cite a
legal expert who states: “the way the IMF has been conducting its
ROSCs has led to turning its offshore financial centre surveillance
process into a grant of a seal of approval”. In a March comment in
the Financial Times, TJN members John Christensen and David Spencer
argued that the current official initiatives, including the IMF’s
reviews are “legitimising the illegitimate” because they ignore
banking practices that facilitate tax evasion.

TJN has called for companies to provide country by country break-
downs of where they take their profits to help eliminate the transfer
pricing that facilitates tax evasion. This call is echoed by three
German NGOs in a report on public finance written by Jens Martens:
“It is the industrialised countries, particularly the EU, the USA and
the institutions that they dominate – the IMF, the World Bank and the
WTO who are responsible for the erosion of revenue bases … The
effective taxation of transnational corporations, the fight against
corruption and the repatriation of embezzled money from foreign bank
accounts to countries of the global south can only be achieved via
strengthened, multilateral cooperation.”

It remains to be seen if the IMF, in its search for relevance, will
take up a vigorous role in policing tax evasion. It will have to
stand up to major shareholders, like the UK, which allow secretive
accounting and financial practices that should be outlawed.

Proposing windfall taxes
------------------------
It emerged in February that French president Nicolas Sarkozy has
asked the IMF to study whether a windfall tax could be levied on
corporate profits, according to a statement from French finance
minister Christine Lagarde. Sarkozy has asked the Fund to think of a
worldwide tax on oil companies’ profits.

The global commodities boom gives new negotiating power to countries
that export raw materials. The Zambian government has toughened its
treatment of extractive industry contracts that were originally
promoted as part of World Bank and IMF conditionality. It is
demanding higher royalties from mining multinationals which were
given tax concessions as part of Bank-supported efforts to improve
the ‘investment climate’.

Zambian president Levy Mwanawasa has announced the cancellation of
all tax concessions for copper mining companies operating in Zambia,
saying they were “unfair and unbalanced.” In their place “the
government has, therefore, decided to introduce a new fiscal and
regulatory regime in order to bring about equitable distribution of
the mineral wealth.” Without the reforms mining firms would have
earned $4 billion in the 2009 financial year but would only have paid
tax of $300 million. Tax is expected to reach $650 million after the
change.

The World Bank supported the contract re-negotiations in Zambia, but
has been reticent to wade further into reform of the global financial
architecture. In September Bank president Robert Zoellick
acknowledged that “a study of the development impact of off-shore
financial centres would be a valuable contribution to the governance
and anti-corruption agenda”. This followed Norway’s request to
conduct a study on the more than $500 billion that illicitly flows
out of developing countries each year (see Update 57). But it appears
that the Bank is backing away from its president’s promise and
instead plans to organise a conference at the end of 2008, with
unspecified input papers. NGOs continue to push for a full study with
external peer review mechanisms.

Liechtenstein: Detailed assessment report on anti-money laundering
http://www.imf.org/external/pubs/ft/scr/2008/cr0887.pdf

Stop this timidity in ending tax haven abuse, Tax Justice Network
http://www.ft.com/cms/s/8f8a5770-ea55-11dc-b3c9-0000779fd2ac.html

The precarious state of public finance
http://www.globalpolicy.org/eu/en/publ/martens_precarious_finance_200
7.pdf

The World Bank and IMF’s long shadow over Zambia’s copper mines,
Eurodad
http://www.eurodad.org/aid/report.aspx?item=2108


===================================================================

23. NGOs demand US Congress to put conditions on IMF gold sales

---------------------------------------------------------------------

A coalition of more than 70 US NGOs, including large labour unions,
wrote to Congress in March to demand that planned IMF gold sales pay
for debt relief as well Fund administrative expenses. They also “urge
that before authorising gold sales, Congress insist on meaningful
reforms in IMF policy in developing countries” including an end to
overly restrictive macroeconomic targets, an exemption for health and
education spending from budget ceilings, transparency at the IMF, and
more participation of civil society in the formulation of IMF
programmes. This effort builds on a February briefing published by
Jubilee USA about the use of the proceeds of IMF gold sales.

http://www.ifiwatchnet.org/node/7929


===================================================================

24. IMF pension reform prompts Turkish strikes

---------------------------------------------------------------------

In early April Turkish unions launched a mass demonstration to
protest against plans for pension and health insurance reform. This
follows an early March two hour “warning strike”. The transportation,
street cleaning, education and health services stopped during the
strikes. The social security reform is a condition of the IMF’s
stand-by arrangement (SBA) with Turkey, and failure to fulfil it
could delay the next loan disbursement of $1.3 billion under the
programme due to expire in May. The Turkish economy minister Mehmet
Simsek announced in late March that a new SBA was unlikely because
the government did not need the money, but concluded that some sort
of IMF programme, such as a precautionary arrangement, would be
signed.


===================================================================

25. IMF rebukes Tajiks over false information

---------------------------------------------------------------------

Tajikistan has gotten itself in hot water with the IMF over poor
reporting of information while the country was borrowing money from
the Fund. The authorities failed to mention that they had guaranteed
a commercial loan of $500 million to the cotton sector, which if
defaulted upon would have increased sovereign debt by 50 per cent.
The IMF also found misreporting of the level of international
reserves in order to appear to be in line with IMF conditions. The
IMF demanded repayment within six months after taking into account
Tajikistan’s “very difficult economic circumstances … as well as the
severe humanitarian crisis prevailing in the country”.

http://www.imf.org/external/np/sec/pr/2008/pr0843.htm


===================================================================

26. Fund trade advice in the crosshairs

---------------------------------------------------------------------

The Independent Evaluation Office (IEO) released the draft issues
paper for its planned evaluation of the IMF’s trade policy advice.
While past IEO reports have tended to look at whether IMF practice is
following policy, the issues paper indicates the evaluation “will aim
to move beyond the question of whether the IMF’s role should be more
focused and address questions of whether … critics of the IMF’s
positions have a solid basis”. That will include criticisms that the
IMF’s trade policy advice has not been even handed and that it has
constrained developing country policy space (see Update 47). The IEO
welcomes comments on the issues paper.

http://www.ieo-imf.org/eval/ongoing/Trade_IP.pdf


===================================================================

27. IMF governance renovations: fresh paint while foundations rot

---------------------------------------------------------------------

The shareholders of the IMF have squandered the political will for
governance reform of the institution by making marginal changes that
will fail to shift the balance of power.

The Fund’s members have been debating how to revamp the formula that
sets voting rights at the institution for more than two years (see
Update 51). Much rancour has been directed at Europe, which has been
the obstacle to quicker progress. A deal was finally approved by the
IMF board end March and sent to the IMF board of governors for
approval. The total increase for developing countries, if the
governors approve the resolution, is only 1.6 percentage points,
meaning that rich countries, representing about 15 per cent of the
membership of the IMF, will continue to wield 60 per cent of the
voting rights.

The final quota formula included some use of GDP measured at
purchasing power parity (PPP), a key demand of developing countries,
as part of the increase of the weight of GDP in the formula. The new
formula continues to use trade openness, which the G24 group of
developing countries has repeatedly called flawed because it is
highly correlated with GDP and it tends to favour small rich
countries with lots of trade. As before, the formula also uses the
variability of trade and investment flows and the amount of
international reserves. A small compression factor has also been
introduced. The total size of quotas will be increased by 9.5 per
cent, with only the new shares being distributed along the lines of
the new formula and several mechanisms being used to determine which
countries are eligible for increases.

If the entire quota were adjusted to the new formula automatically,
it would actually shift voting weight to rich countries at the
expense of middle- and low-income ones, a problem identified as early
as 2006 (see Update 53). To achieve the committed goal of increasing
the voting weight of developing countries, basic votes, which are
given in a set amount to every member of the IMF, will increase from
2.1 to 5.5 per cent of the total. This is still far below their
highest level of almost 16 per cent.

Additionally the US will forego any quota increase. It promised in
2006 to not increase its quota share beyond the pre-Singapore
resolution level. In the final bargaining, official sources tell the
Bretton Woods Project that the US accepted remaining at their
slightly lower current quota share, but that in return they expected
all the other countries on the board not to publicly complain about
the final compromise.

Ralph Bryant, a scholar at the Washington-based Brookings
Institution, called the compromise inadequate:  “The image to have in
mind is that of a decades-old building in need of major repairs and
renovation. The plumbing is ancient and badly needs updating.  The
roof is leaking in places. Termites have been found in the support
joists in the basement. What is on offer is, essentially, a fresh
coat of paint in the entrance hallway and the fixing of some broken
glass panes in the windows facing the street.”

One of the few officials willing to comment was the director of the
South Centre, a Geneva-based intergovernmental think tank for
developing countries, Yash Tandon. He welcomed the recognition of the
need for changes but felt that they "do not go far enough to remedy
the governance imbalance in the IMF. What is being proposed is too
little and preserves developed country control over the IMF. ... The
real issue is how developing countries can have a stronger 'voice' in
shaping how the institution is run. This means that other aspects of
IMF governance must also be dealt with".

The board of governors still must agree to the deal, which is
expected by end-April. Because it alters the IMF’s Articles of
Agreement, the deal must also be ratified by legislatures in some
member states, like the US. This leaves a chance that it could be
rejected.

News reports indicate opposition on the board from some emerging
markets who stand to lose, notably Russia, Iran, Egypt, Indonesia and
Kenya. But they concede that the reforms will likely go ahead. Most
developing countries think this is the best deal possible at this
time so have resigned themselves to the minor changes.  Bryant would
prefer more resistance, saying in a G24 technical paper: “For the
short run, ‘nothing’ is a better gamble than an inadequate
‘something’.”

Board reform still off the table
--------------------------------
Part of the problem is that the quota reform is being discussed in
isolation from other elements of governance reform. While European
dominance of the board is becoming a hot issue, the quota reform was
agreed without any compromise on the issue of representation.

In a February speech, US Treasury under secretary for international
affairs David McCormick fired a shot across the bow of Europe: “The
executive board is simply too large, too inefficient, too costly, and
too unrepresentative … we call on other nations to work with us to
reduce the number of chairs in the IMF board … in doing so, the
number of developing and emerging market country chairs should be
preserved. … We also advocate an amendment to the Articles so that
all executive board members are ‘elected,’ abolishing the current
practice of ‘appointed seats’ for the five largest shareholders.”

Without mentioning Europe, McCormick targeted the continent. An end
to appointed chairs would facilitate the consolidation of
representation for the three European countries with such seats: the
UK, France and Germany. Ted Truman of the US think tank the Peterson
Institute likewise concluded: “everyone knows what needs to be done
to break this logjam: dramatic consolidation of European
representation.” NGOs across Europe have been pressing this point
both in their capitals and with European Union institutions in
Brussels.

The European Parliament concurred in 2006 (see Update 50) and now the
European Union commissioner for economic and monetary affairs Joaquín
Almunia, the closest the EU has to a finance minister, gave a speech
in January recognising the need for faster movement. “Achieving a
single euro area chair in international fora has so far been
considered an objective for the longer term. But the world is moving
faster and we need to reconsider our timetable … we cannot avoid
pressing member states to move forward on this issue.” But Almunia’s
timetable, measured in years not months, seems timid.

Other governance issues have yet to be sorted out. African executive
director were given an additional alternate director, thereby
increasing their capacity to handle large work loads, but the budget
freeze means this will likely be offset by fewer advisors. The
resignation of Tommaso Paddoa-Schioppa, the former Italian finance
minister, from the post of IMFC chair, in the wake of his
government’s collapse in Italy, may give impetus for the IMFC to
finally be chaired by a developing country (see Update 58). However
the delay of a review of the Fund’s transparency policy has rankled
civil society who have written to IMF managing director Dominique
Strauss-Kahn to complain of being shut out of the process of Fund
reform.

Reform of quota and voting shares in the IMF, Ralph Bryant
http://www.g24.org/bray0308.pdf

Remarks by David McCormick
http://www.treas.gov/press/releases/hp861.htm

NGO letter on transparency and IMF reform, Bank Information Center
http://www.ifiwatchnet.org/node/7893


===================================================================

28. World Bank strategic review kicked into long grass

---------------------------------------------------------------------

In late 2006, then-president Paul Wolfowitz initiated a process to
come up with a long-term strategic vision for the World Bank. Former
chief economist François Bourguignon published a background paper
before his retirement last October (see Update 57). In a speech at
the 2007 annual meetings, new president Robert Zoellick announced six
“strategic themes”: the poorest countries, post-conflict countries,
middle-income countries, global public goods, the Arab world and the
Bank’s knowledge function. Bank watchers have been trying to decipher
what this means for the planned strategic review.  At a meeting
between European executive directors and NGOs in February, the
officials claimed that they were also being kept in the dark about
the review.

The Bank’s vice-president for external affairs, Marwan Muasher has
said that the institution will be holding “two rounds of broader
communication about these thematic areas, both internally and
externally”, stressing that “this will be an ongoing process, not a
finite one - Bob Zoellick has described it as a ‘network of
conversations’”. The process could continue “over the next year or
two”. No formal global consultation is planned because, as Muasher
explains, “we don’t think it would work well and we can use other
channels for getting input”.

The exception to this is work on the Arab world. Zoellick and other
senior staff will be making trips to the region and further
consultations are planned including a meeting with “prominent
thinkers” in Egypt in May. Consultations so far have included: Arab
and Islamic funds; visits to Egypt, Jordan, Morocco, Bahrain, UAE,
Kuwait and Oman; the Arab League; and “several Arab civil society
groups”.

At the end of March, the Bank was due to begin work on its regular
bi-annual poll of “global opinion leaders”. This iteration will
cover, amongst other topics, the six strategic themes. According to
Muasher, the results of this poll “will be disclosed eventually,
after the board has seen it - but that will not be for many months”.
Descriptions of the work being done are to be posted on the Bank’s
website, and online discussions with leaders of the thematic groups
are planned. A ‘dialogue session’ with civil society is planned for
the spring meetings.

===================================================================

29. IFC challenges highlighted in the Middle East: Doing Business
    indicators come under fire
By Amy Ekdawi, Bank Information Center

---------------------------------------------------------------------

The International Finance Corp­oration (IFC), the private sector arm
of the World Bank, is rapidly increasing its investment in the Middle
East and North Africa region (MENA), raising questions about the
development value of its activities.

MENA is the fastest growing region in the IFC’s portfolio, with
investments doubling from $670 million in 2006 to $1.2 billion in
2007. The portfolio in 2007 consisted of 41 projects primarily
invested in financial institutions. Investment  will surpass $1.5
billion in 2008.

During a January visit to Saudi Arabia, IFC head Lars Thunell
expressed the IFC’s commitment to help expand housing finance - a
priority area for the IFC. He signed a public-private partnership
agreement with the General Authority of Civil Aviation to work
closely with the Saudi government in developing three “airport
cities” in the country. This in one of the richest countries in the
world currently enjoying an unprecedented oil bonanza.

Yemen is the poorest country in the region and one of the ‘frontier
countries’ that the IFC has committed to focus on (see Update 58).
While oil revenues currently account for three-fourths of Yemen’s
revenues, experts expect that it could become a net crude oil
importer by 2011. The IMF and the World Bank have emphasised the
importance of diversification, however a significant part of the IFC
portfolio remains in the oil and gas sector.

Despite trumpeting the importance of small and medium enterprises to
build the backbone of frontier countries’ economic systems, the IFC
has yet to invest in them in Yemen. It has decided to cooperate
mainly with stronger private groups  after it “suffered in the past
from dealing with weak sponsors”. Out of the six projects that the
IFC has approved for Yemen in the last two years, two are owned by
the same well-established Yemeni investor, the HSA Group.

In March the IFC organised a workshop for Yemeni government officials
and the private sector to discuss the country’s tax reform process.
The initiative is one of a series of conditions introduced by the
Bank with its latest $50 million IDA grant to support the Yemeni
government’s economic reform programme. While the IFC takes the lead
on advising the government to lower corporate taxes to be “in
conformity with international norms” as mandated by the IMF, Yemen
will be required to make up for lost revenue by doubling the general
sales tax to 10 per cent in 2009. Other proposed reforms include
ending domestic fuel subsidies by 2010 and cutting wages and salaries
by 1.6 per cent of GDP. With 42 per cent of Yemenis living in
poverty, the Bank estimates that the elimination of petroleum
subsidies will increase the poverty rate by 9.2 per cent. The spike
in global food prices could lead to a further 6 per cent increase.
The introduction of a higher regressive sales tax will also hit the
poor the hardest.

Not Doing Business
------------------
Influential in the region has been the IFC’s annual Doing Business
indicators, which rank countries on how ‘business friendly’ they are
(see Update 57). Egypt topped the list of reformers in the most
recent report released last October. The week of the report’s
release, 27,000 employees of the country’s largest textile mills,
most of whom receive salaries below the poverty level, went on strike
demanding higher wages and benefits. Saudi Arabia was also among the
top reformers, receiving the best possible score on the ‘employing
workers’ index, despite its prohibitions of freedom of association,
the right to organise and collective bargaining.

The Bank’s own evaluation unit is due to release an evaluation of the
Doing Business indicators. That evaluation has been pre-empted by a
study commissioned by the Norwegian ministry of foreign affairs.
Conducted by the ESOP research centre at the University of Oslo, the
study questions the value of the indicators as a policy tool. The
indicators, assuming that they do capture the underlying business
environment, are not able to “clearly distinguish the quality of the
business environment of an economy ranked at number 75 from one
ranked at number 40”. While questioning the indicators’ assumption
that extra labour costs are always bad for business, the study finds
the effect of the ‘employing workers index’ on the overall ranking
marginal. The authors call on the IFC to be more transparent about
its methodology, and warn against governments designing policies to
improve their position in the rankings.

Bank Information Center MENA page,
http://www.bicusa.org/en/Region.18.aspx

IFC MENA page
http://www.ifc.org/mena

Norwegian study on Doing Business
http://www.ifiwatchnet.org/node/8288


===================================================================

30. World Bank-IMF spring meetings 2008

---------------------------------------------------------------------

Official meetings:
11 April	Meeting of G24 group of developing countries and G7
finance ministers

12 April	International Monetary and Financial Committee
meeting.
Tentative agenda: Global economic outlook; IMF quota reform; progress
reports on the activities of the IEO

13 April	Development Committee meeting
Tentative agenda:
* poverty in low-income countries (particularly Africa), including
achieving the MDGs, growth strategies, and higher commodity prices;
* strategy for Bank engagement in fragile and post-conflict states;
and
* further discussion on: food and energy prices, voice and
representation at the Bank

Civil society, World Bank spring meetings events:
9 April 	Karachaganak oil and gas field in northwestern
Kazakhstan

10 April	Meeting with the Inspection Panel, use of country
systems, implementing the anti-corruption strategy, CSOs and Bank
training, the IFC in India

11 April	World Bank's six strategic themes, IFC and IDA,
review of the Bank's CSO engagement, aid effectiveness, update on the
CAO, macroeconomic consequences of climate change, water
privatisation in Ecuador

12 April	Extractive industries revenue transparency, capital
flows to low-income countries

13 April	World Bank/Bechtel investment in Ecuador's water
system

For full details of events, contact information for groups in
Washington for the meetings, blogs of the events and links to
documents released by civil society, visit
http://www.ifiwatchnet.org


===================================================================

31. Special issue: Feedback wanted

---------------------------------------------------------------------

This expanded issue of the Bretton Woods Update is part of a trial
initiative to bring you broader insights into the international
financial institutions. It was produced in conjunction with
colleagues at NGOs Afrodad, Bank Information Center, Choike, and
Eurodad. Please send us your feedback and comments.

info@brettonwoodsproject.org


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Critical voices on the World Bank and IMF

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