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

Number 79, January/February 2012

Published by BRETTON WOODS PROJECT
Working with NGOs and researchers to monitor the World Bank and IMF


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1.  World Bank or US Bank? President selection debate launched
2.  IMF in a euromess?
3.  Comment - From Argentina to Greece: similar but different
4.  IFC’s private equity investments cause controversy
5.  IMF and capital flows: all talk, no solution
6   Inside the institutions: IMF resources
7.  On a carbon market mission: the Bank at the Durban climate summit
8.  Harvesting controversy: Bank’s agriculture projects under
    scrutiny
9.  Green light for revised PforR, but concerns remain
10. Guest analysis - Unsafe haven? New IFC tax haven policy
    questioned
11. New Bank infrastructure strategy: Paving over development?
12. The World Bank and extractives: a rich seam of controversy
13. Recommended resources 2011
14. Petra Kjell joins the Project
15. IMF loan to Egypt branded as "odious"
16. HIPC winds down amid controversy
17. ICSID offers "impunity" for corporations
18. Bank loans linked to child mortality
19. Bank-funded "toxic dumping ground"
20. Questions hang over Bank safeguard review
21. Complaint against IFC in Mozambique
22. Transparency at the Bank questioned


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

1. World Bank or US Bank? President selection debate launched

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

Rumours that Robert Zoellick will not seek another term as Bank
president after his term ends in June have thrown open the debate
about leadership selection at the Bank.

In November 2011, political analysts and news reports began
speculating that Zoellick would not seek a second term as Bank
president, but by early February he still had not said anything in
public. The Bank board was also silent on the issue, as Sunil Chacko,
an academic at Simon Fraser University in Canada, wrote in a January
piece for the website Huffington Post: "By not producing and leading
an open, merit-based selection process the World Bank board is
opening the doors for machinations of all kinds frequently seen in
the international system, otherwise known as horse-trading." Chacko
called for the next Bank president to be selected in a transparent
manner before Zoellick’s term ends on 30 June.

Since October 2008, the Development Committee, a group of finance and
development ministers that guides the Bank’s direction, has endorsed
an "open, merit-based and transparent" selection process "with
nominations open to all board members and transparent board
consideration of all candidates" (see Update 63). In April 2011, the
Bank’s executive board approved a paper that "regularised the
selection process for the president based on the Bank’s past
experience and practice".

The paper lays out recommendations for nomination, shortlisting and
final selection of the president, but fails to go beyond the Bank’s
own past practice, which has long been criticised by many civil
society groups as weak and unfair due to the gentlemen’s agreement
that allows the US to appoint the president of the Bank, while
European leaders get to choose the head of the IMF. Collins Magalasi,
of the African Forum and Network on Debt and Development, argued that
"it’s a World Bank, not a US Bank. It needs the best candidate to get
the job with support of wide Bank membership, not just the US."

The process recommended in the paper is closed to any kind of
external input and leaves many details to be decided by the board
during each selection round, including the duration of the candidate
nomination period. Moreover, development experience is not mentioned
as a qualification criterion, even though the Bank only operates in
developing countries. This fact has long prompted many civil society
groups to argue that any candidate to the Bank presidency, as well as
to the IMF’s top job, who is not supported by a majority of
developing countries would lack legitimacy (see Update 75). Calls for
a presidential selection that is truly competitive and rewards the
best candidate available are being further discussed at
worldbankpresident.org, a blog relaunched in January 2012 to provide
a space for debate around the selection process.

Other international forums are also pushing for change at the Bank.
In December last year the United Nations’ General Assembly adopted a
resolution that called for the reform of governance structures at the
Bank and IMF, including regarding the representation of developing
countries in quotas and voting rights. The resolution also
"reiterates that the heads and senior leadership of the international
financial institutions, particularly the Bretton Woods institutions,
should be appointed through open, transparent and merit-based
selection processes, with due regard to gender equality and
geographical and regional representation."

The G20 made this same commitment in a June 2010 communiqué that
endorses "open, transparent and merit-based selection processes for
the heads and senior leadership of all the international financial
institutions (IFIs)" (see Update 71). Even Bank staff recognised the
need for "merit-based" appointments to civil service posts in the
Bank’s new draft governance and anti-corruption strategy and
implementation plan, which was published in January.

European dominance of the IMF was reinforced in June 2011 when
Mexico’s central bank governor, Agustín Carstens, was sidelined in
the race for the Fund’s top job and European candidate Christine
Lagarde sailed through a hasty selection process (see Update 76). It
seems certain that the US will push to hold its grip on the Bank
presidency when Zoellick leaves. The media has reported that US
Secretary of State Hillary Clinton is interested in the job, while in
January the name of former Obama administration economic adviser and
former Bank chief economist, Lawrence Summers, emerged as another
potential US candidate.

Soren Ambrose of NGO ActionAid said: "If Bank members want a genuine
reformer, the best candidates could be developing countries academics
and officials, like Chilean Michelle Bachelet, Costa Rican Rebeca
Grynspan or Malaysian Jomo K.S. Even if they only want to preserve
the status quo, there are plenty from the South who would do as good
a job as Summers or Clinton."

worldbankpresident.org

tinyurl.com/unresolution


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2. IMF in a euromess?

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

The IMF responds to calls from European leaders to get more involved
in the region’s debt crisis through greater lending, while the
austerity policies being demanded stoke further criticism from civil
society organisations.

In early December 2011, European Union (EU) countries met yet again
to discuss new efforts to bring the region’s financial crisis to an
end. With the exception of the UK and the Czech Republic, the rest of
the EU agreed to prioritise work on a new "fiscal compact" to hard-
wire fiscal policy limits into the constitutions of European
countries. The IMF was present in the negotiations and eurozone
countries are looking for IMF support, both rhetorical and monetary,
as a means of restoring credibility to their fiscal policies (see
Update 78, 77).

Rather than use the European Central Bank, the central bank for the
eurozone, to lend directly to governments in distress, the major
European national central banks would prefer to provide more
resources to the IMF. They expect the IMF to then lend the money back
to eurozone governments who are facing difficulty borrowing from
capital markets (see box). If accepted, this plan would bring the IMF
closer into the region’s acrimonious internal debates about the
crisis.

Wolfgang Münchau of the Financial Times argued that "the eurozone
should change its rules before crawling to others, cap in hand."
Münchau goes on: "Considering that the eurozone is economically
unconstrained, and among the richest regions in the world, the
request to involve the IMF in hypothetical future rescue operations
is morally reprehensible."

IMF head Christine Lagarde continues to warn of the risks of spending
cuts coming too quickly. Despite this, the Fund is still demanding
deep cuts in countries it is lending to. In late January Lagarde
outlined her prescriptions for the eurozone: "There are three
imperatives - stronger growth, larger firewalls, and deeper
integration." A mid January joint statement from Lagarde and the
heads of other multilateral and regional institutions called for
countries to "manage fiscal consolidation to promote rather than
reduce prospects for growth and employment. It should be applied in a
socially responsible manner."

Programmes in trouble
---------------------

However, fiscal consolidation programmes are proving contentious in
European countries borrowing from the IMF precisely because of the
negative social impacts. Massive protests flared in Romania in mid
January over attempts by the government to partially privatise the
health service. The government eventually backed down, but nightly
protests calling on it to resign continued throughout the month.

Also in January, the Greek people’s movement again occupied squares
across the country in protest against government policies. The Greek
IMF-EU programme continues to be stalled over the depth of new
austerity measures and the failure to conclude negotiations on a
‘voluntary’ swap of Greek sovereign bonds that will impose losses on
private creditors. In early February negotiators from Greece’s
unelected government refused IMF-EU demands for lowering the
country’s minimum wage, saying they had no political backing. Lead
IMF negotiator Poul Thomsen admitted that the social tensions created
by austerity were undermining the economy and said the IMF wanted  to
"go a little slower as far as fiscal consolidation is concerned."

As Greek sovereign debt has been trading in financial markets at
prices much below the write downs expected in the debt swap deal,
University of Athens professor Yanis Varoufakis has called the debt
swaps "an error in search of a rationale. It gives shadow banking a
great new opportunity to profiteer at the expense of Greece and of
Europe and escalated the latter’s crisis rather than help tame it."

In Portugal, a general strike shut down the country in late November
after the IMF-EU mandated austerity programme deepened the country’s
recession. In early September 2011 the IMF had expected a GDP decline
of 1.2 per cent in 2012, but by mid November it projected a 3 per
cent decline. Jorge Bateira of the University of Porto said that,
given the recession and revenue shortfall, "it is all coming together
so that a deflationary spiral will devastate the country making it
more indebted, poor and desperate."

Ireland is facing the same dilemma. Michael Taft of the Irish
Congress of Trade Unions found that five-year GDP growth projections
have been revised down from 10.75 per cent to 7.7 per cent and
employment growth from 4.35 per cent to -0.1 per cent. Taft asked:
"So did the EU and the IMF get it wrong?  There’s little doubt."

Box: IMF resources boost?
-------------------------

In an early December EU summit, European leaders agreed "the
provision of additional resources for the IMF of up to €200 billion
($270 billion), in the form of bilateral loans, to ensure that the
IMF has adequate resources to deal with the crisis." Media reported
that eurozone countries would give €150 billion, with the rest
contributed by other EU member states.

With these commitments in hand, IMF head Christine Lagarde sought a
mandate to try to raise more money for the Fund at a mid January IMF
executive board discussion on the adequacy of the Fund’s resources.
Lagarde stated that "Fund management and staff will explore options
for increasing the Fund’s firepower" and briefed the press that she
wanted an additional $500 billion made available, including the money
from Europe. The US Treasury, the largest provider of funds to the
IMF (see page 5) clarified: "We have told our international partners
that we have no intention to seek additional resources for the IMF."
Europe and the US had blocked more resources for the IMF during the
2010 quota reform when large developing countries wanted to
contribute more money in exchange for greater voting rights (see
Update 73).

By the end of 2011, 61 per cent of the IMF’s outstanding credits were
for EU countries, with a further 15 per cent to non-EU countries.

tinyurl.com/MunchauIMF

Greece’s PSI is dead on arrival
tinyurl.com/Yanisvaroufakis

Does the EU-IMF owe Ireland an apology?, Irish Left Review
tinyurl.com/TaftIMF


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3. Comment - From Argentina to Greece: similar but different

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

by Pablo Nemiña, Institute of High Social Studies at National
University of San Martín, Argentina

The economic crisis in Argentina in 2001 and Greece today share both
similarities and differences, so we should be wary of stretching
comparisons.

The economic regimes that lead to the recession in both countries
appear analogous. In the context of economic deregulation and
financial and commercial liberalisation, Argentina’s convertibilidad
policy, which pegged the Argentine peso to the dollar, and the
adoption of the euro in Greece, established a fixed and overvalued
exchange rate regime. This helped to control inflation but with the
cost of deteriorating local productive capacity.

In both cases the stability of the economy became dependent on
capital inflows to stimulate domestic demand. But due to permanent
balance of payment deficits, the economies became dependent on
foreign debt.  Therefore, the trigger of the crisis in both cases
comes from the limited external financing rather than the fiscal
deficits.

However, when the Argentine and Greek capital account crises
deepened, with the 1998 Asian financial crisis and the 2008 crisis
respectively, fiscal austerity and wage contraction became the mantra
of creditors, who had an interest in maintaining the exchange rate
regime in order not to experience financial losses. In Argentina,
despite the context of a recession, the IMF encouraged the
implementation of orthodox measures like the reduction of social
spending and the easing of labour protections. In Greece, after a
short period of flirting with Keynesianism, the troika (IMF, European
Union and European Central Bank) imposed unpopular adjustments like
the ones in Argentina to ensure the continuity of the monetary regime
and protect financial sector profits.

After the outbreak of an unprecedented economic and social crisis in
late 2001, Argentina devalued its currency and defaulted on over 65
per cent of total public debt. Combined with a natural resource boom,
these measures subsequently contributed to a cycle of unprecedented
growth.

The 2001 Argentine experience resonates in 2011 in Greece: the
restructuring of an unpayable debt and improving competitiveness are
key elements to the restoration of production and employment
creation. However, the political economy of both cases makes it hard
to believe in a linear reprint.

First, a return to a Greek currency depreciated against the euro will
face opposition from Germany, as it will affect its export-led growth
strategy. Greece’s limited productive capacity also hinders the
likelihood of finding alternative international trade beyond the
European Union (EU).

Second, the Greek debt is concentrated in French, German and British
banks. These countries are less likely to promote a debt
restructuring large enough to restore the solvency of the Greek
government. Argentina, however, had its debt distributed in various
individual and institutional creditors (almost 40 per cent local,
which facilitated the negotiation), and its aggressive renegotiation
strategy was supported by the US, which sought to reduce moral hazard
in international capital markets by making an example of Argentina.
Also, in 2001 the world economy was on the verge of a period of
robust growth, but it is now mired in a deep international crisis.

Third and finally, IMF intervention in Greece is done with the EU and
the European Central Bank (ECB), who are leading the process.
Therefore, its role is limited to providing loans attached to the EU
and ECB conditionality package of fiscal austerity and privatisation.
In the Argentine case, the main global powers left the IMF in charge
alone.

The reestablishment of a sustainable and inclusive growth path in
Greece is more difficult than in Argentina and requires a strong
commitment by all EU countries to reduce asymmetries in the region.
The centrality of the regional dimension in the resolution of the
Greek crisis means that Europe needs to re-assess whether it is
willing to promote and safeguard financial interests at the cost of
the social bases on which the EU is founded.

Alcances de la reforma de la política de financiamiento y
condicionalidad del FMI, Universidad Nacional Autenoma de Mexico

tinyurl.com/NeminaFMI

pnemina@unsam.edu.ar


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

4. IFC’s private equity investments cause controversy

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

The increasing use of private equity (PE) firms as conduits for World
Bank lending continues to stoke controversy (see Update 76, 73).

In October last year, the International Finance Corporation (IFC, the
Bank’s private sector arm), signed up Emerging Capital Partners (ECP)
as the first participant in the IFC’s Private Equity Africa Climate
Change Investment Support Program. This follows a $25 million
investment by the IFC in ECP in July 2010.

In January, a BBC report revealed that ECP hired a private
investigation company to covertly monitor Dotun Oloko, a Nigerian
whistleblower who had alerted ECP’s institutional investors to
corruption allegations against the firm. Oloko, who lives in fear of
retribution and is unable to return to Nigeria said "it is absolutely
outrageous that the IFC can back ECP as a partner for development
finance in Africa at a time when the ECP is facing strong and
credible accusations of corruption, fraud and money-laundering."

In June 2011, US-based NGO Pacific Environment wrote to the IFC,
regarding corruption allegations surrounding investments in Oceanic
Bank in Nigeria made by the IFC-supported Ethos private equity fund.
The letter points out that "in 2007, Ethos Fund V announced it had
led a consortium that invested $130 million in Oceanic Bank
International Plc. Oceanic Bank has been named in Nigerian corruption
and malfeasance investigations, and its former CEO and managing
director ... was subsequently convicted and jailed for fraud."

It goes on to note that "in 2010, Oceanic Bank’s participation in the
US Export-Import Bank’s Nigerian banking facility was revoked
following an investigation by the agency’s inspector general." The
IFC’s response notes that "the IFC reviewed Ethos’s due diligence in
connection with the Oceanic Bank investment" and concluded that it
"was in line with generally accepted business practices." In December
2011 the IFC committed a further $30 million to Ethos.

In September last year the IFC made its first investment in a hedge
fund. The IFC has invested $100 million into a fund being set up by
London and New York-based Christofferson Robb & Company. Nick
Hildyard of UK-based NGO Cornerhouse said "jumping into bed with
shadowy hedge funds raises serious questions about the IFC’s
commitment to poverty reduction, and will make it impossible to track
the impact of the IFC’s cash on the people it is supposed to help."

In September, the World Bank issued a robust response to a critical
report by Swiss NGO the Berne Declaration (see Update 78) on loans to
Turkey from the Clean Technology Fund (CTF, one of the Bank-housed
Climate Investment Funds). It denies the allegations that the Bank is
over-estimating the amount of additional private finance ‘leveraged’
by the CTF, arguing that "CTF resources of $100 million have
leveraged about $800 million of additional resources". However,
closer reading of their response shows that much of these
"additional" resources are in fact further World Bank loans, not
private investments.

The Bank agrees "that it is important that information ... is made
publicly available during subproject implementation." However, there
is no commitment to apply this requirement to existing loans, or
other CTF or Bank loans outside of this project.


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

5. IMF and capital flows: all talk, no solution

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

As the IMF and Bank of England predict that increasing volatility of
global capital flows will motivate widespread use of capital
controls, academics and civil society organisations are calling for
coordinated global solutions.

New IMF research confirms the Fund’s cautious acceptance of capital
controls (see Update 78, 75, 72) and incorporates source countries in
the analysis.  An IMF staff paper published in late November 2011,
The multilateral aspects of policies affecting capital flows, points
out that "gross inflows into emerging economies have become more
volatile" as a consequence of "economic developments and policy
actions in a small number of financial centres." The paper argues
that in order to reduce global capital flows’ riskiness, policymakers
in source countries "should pay more attention to the multilateral
effects of their policies", especially in the area of financial
sector regulation. However, "the complicated transmission of the
multilateral effects weakens the case for major central banks to
consider them actively in their monetary policy." The executive board
meeting on the paper saw most directors agree with these conclusions.

The staff paper also analyses the effects on neighbouring countries
of capital flow measures (CFMs) in recipient countries. The authors
conclude that "empirical evidence ... is inconclusive thus far." The
paper accepts that "In theory, global welfare could be improved by a
coordinated policy combination of expansionary advanced economy
monetary policy coupled with the collective adoption of CFMs by
emerging market economies (EMEs)." However, it warns of "the rise of
financial protectionism ... which would limit the benefits of
financial globalisation ... and escalate global costs."

A January IMF working paper, Surges, finds that easily changeable
factors like "the real US interest rate and global market
uncertainty, determine whether there will be a surge of capital flows
towards EMEs." This means the EME case "for imposing capital controls
... may be correspondingly stronger."

Correctionist, not protectionist
--------------------------------

The staff paper proposes that the multilateral aspects should be
included in the "previously proposed framework", a code of conduct
published in April 2011 but rejected by developing countries (see
Update 76). In late November Kevin Gallagher of Boston University
commented that "it’s great the IMF has complemented their existing
research on this by looking at the industrialised world". He lamented
the idea of trying to revive the code of conduct, which "could
eventually lead to capital account liberalisation across the globe,
the IMF should instead work to reduce the stigma attached to capital
controls, protect countries’ ability to deploy them, and help nations
police investors who evade regulation."

In a January paper Gallagher also argues that capital account
management techniques "are justified as an important part of the
macroeconomic toolkit from a wide variety of theoretical perspectives
within economics" and that, contrary to the claims in the popular
press and by some in the economics profession "that capital controls
are inherently protectionist measures, ... capital controls [are]
measures to correct for market failures in the world economy."

Jorge Gaggero, from Buenos Aires-based think tank Cefid-Ar, said
"that most staff at the Fund agree on the urgency of implementing
capital account regulations but do not have the political space to
openly challenge international finance treaties: they know there is
no point in making policy proposals that the executive board will
reject. The efficiency argument and the attempt to spread fears of
financial protectionism are just a facade to hide the contradiction
between their diagnosis and their lack of substantial proposals."

Two December Bank of England reports highlight the advantages of past
systems which regulated flows and conclude that capital controls
might increasingly be deployed to deal with volatility. However, the
emphasis of the reports is to tackle so-called imbalances from the
trade side. According to Peter Chowla from the Bretton Woods Project,
"the Bank of England’s big idea is worrisome" because it "boils down
to the UK following the US Senate in trying to slap import tariffs on
Chinese goods."

Breaking the mould
------------------

Two new reports released in December 2011 by Latin American NGO
coalition Latindadd and UK-based NGO the Bretton Woods Project, show
how a new pragmatic approach to regulation of financial flows can
help ensure stability and development. One of the reports, Time for a
new consensus, argues that source and recipient countries "need to
commence serious discussions ... at the IMF or elsewhere, on how
source countries can effectively contribute to the stability of
financial flows." The report also stresses that developing countries
need to start working "in regional configurations to coordinate
capital account management."

A second report, Breaking the mould, reviewed the evidence on the
developmental impact of capital account management measures in Latin
America. Co-author of the report Jorge Coronado said that this "shows
that regulations on capital inflows and outflows are helping Latin
America to achieve not only financial stability, but also to promote
development goals like poverty reduction and employment creation.
These findings challenge the current IMF stance, which gives
inadequate consideration to the impact volatile capital flows have on
economic activity and employment." Coronado concluded that "the IMF
should pay more attention to the views of developing countries’
authorities and stop clinging to socially destructive prescriptions."

In February further IMF research will cover capital account
liberalisation and managing capital outflows. A policy paper to be
discussed at the board in April will draw together previous and
current work toward articulation "of a comprehensive, balanced, and
flexible Fund institutional view on policies affecting capital
flows".

Time for a new consensus
brettonwoodsproject.org/timeforanewconsensus

Breaking the mould
brettonwoodsproject.org/breakingthemould

Gallagher paper
tinyurl.com/Gallagherpaper


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

6. Inside the institutions: IMF resources

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

One of the IMF’s three roles is lending to members countries with
balance of payments difficulties, using resources provided by its
other members. Generally, these resources come in two forms: quota
contributions tied to voting rights in the institution, and bilateral
contributions which do not affect countries’ voting rights.

The main source of IMF resources is supposed to be IMF quota
contributions, the money countries pay into the Fund for their
membership of the institution. The quota is used in three ways: to
determine voting rights, to determine contributions, and to set a
guideline for the level of resources a country can borrow. As of
2008, the total IMF quota for all countries was $366 billion. In 2010
it was agreed to double the size of the IMF quota to $732 billion,
but this will not come into force until IMF members with 85 per cent
of voting rights approve the change, which is expected by the end of
2012 (see Update 73). Normally IMF members contribute one-quarter of
their quota in the form of widely accepted foreign currencies such as
the dollar, euro, yen or pound sterling. The remaining three-quarters
are committed to the Fund in the country’s own currency, though only
paid in when the Fund demands the resources.

The size of a country’s quota is determined by the quota formula,
which takes into account four factors: the size of the economy, the
level of foreign reserves, the volume of foreign trade, and the
variability of trade and capital flows. Currently, the US has 17.7
per cent of the quota meaning a $65 billion contribution, while China
has 4 per cent meaning about $15 billion.

Aside from the quota, the IMF has standing arrangements to
bilaterally borrow money from its members. Contributions through
these arrangements do not affect IMF voting rights. The most
important of these is the New Arrangements to Borrow (NAB), which is
designed as a "backstop to the Fund’s quota-based financing
mechanism", and which is "only to be used when supplementary
resources to quota resources are required". The NAB was first agreed
in 1997 between the IMF and 25 high-income IMF member countries. In
2009, in response to the financial crisis, it was expanded from the
26 countries participating at the time, who had pledged about $52
billion, to take in 13 new countries, including large middle-income
countries, with a total commitment of $568 billion (see Update 65).

Nearly 60 per cent of NAB commitments are from G7 countries, while
the biggest emerging markets (Brazil, Russia, India, China and South
Africa) represent just 15 per cent of the total. Regionally, European
countries (excluding Russia) made the largest commitments at 39 per
cent of the total, followed by East and South Asian countries at 31
per cent. With a commitment of about $106 billion, the US is the
largest participant. Before 2009, activation of the NAB was on a
case-by-case basis when a country requested a large loan. Since then,
the NAB can be activated for a period of instability. It was last
activated in October 2011 for a six-month period.

The IMF can also find resources using the General Arrangements to
Borrow (GAB). The GAB is an older instrument, established in 1962,
and counts on the participation of 11 developed countries. The
current commitments through the GAB are $26 billion, of which the US
has committed $6.5 billion. While the GAB was used extensively up
until the late 1990s, under current rules the GAB can only be
activated if NAB activation has been refused. In 2009 a number of
countries agreed bilateral loans with the IMF outside of the usual
NAB and GAB arrangements, and the IMF also bilaterally sold bonds to
some member countries, the first time it has done this. As of
November 2011, there was an additional $87 billion provided in this
way.

In early 2012, IMF managing director Christine Lagarde received the
consent of the IMF executive board to explore ways to increase the
resources available to the IMF by another $500 billion (see page 2).
It is not yet clear whether the new resources will be delivered as
bilateral commitments or quota-based contributions.

Factsheet: Where the IMF gets its money, IMF
www.imf.org/external/np/exr/facts/finfac.htm


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

7. On a carbon market mission: the Bank at the Durban climate summit

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

While steaming ahead with new carbon market initiatives, the World
Bank attracted further criticism and suffered potential setbacks on
agriculture and on the Green Climate Fund (GCF) at the UN climate
negotiations in Durban.

As the UN’s Framework Convention on Climate Change (UNFCCC) summit
opened in Durban in November last year, the Bank’s climate record
came under renewed scrutiny. People from all over the world joined
the Global Day of Action and other protests to voice their concerns
about the Bank’s involvement in climate finance during the summit. A
group of civil society organisations, including the BASIC South
Initiative and the Sierra Club, launched the report Unclear on the
concept: How can the World Bank Group lead on climate finance without
an energy strategy? It argues that the Bank should finally agree a
low-carbon energy strategy that ends funding for dirty energy and
provides access to clean energy.

Weakened role in the GCF
------------------------

A major outcome of the summit was the adoption of the GCF (see Update
78, 76). While the Bank will hold the interim trustee position for
the first three years, civil society groups, such as Friends of the
Earth, broadly welcomed that the GFC’s permanent trustee will be
selected through an "open, transparent and competitive bidding
process". A hard-won victory for developing countries was the
inclusion of a no-objection procedure, which lets designated country
authorities put limits on the private sector’s direct access to GCF
funding.

While the US pushed for the interim secretariat to be hosted by the
Bank, resistance from developing countries led to a shared
arrangement between the UNFCCC and the Bank-housed Global Environment
Facility (GEF, see Update 8). However, many civil society groups did
not think the agreement went far enough. Lidy Nacpil of Jubilee South
said: "the fund is being hijacked by the rich countries, setting up
the World Bank as interim trustee and providing direct access to
money meant for developing countries to the private sector".

A new report released in December by UK NGO World Development
Movement questions the Bank’s direct financing for private entities
in climate finance. Power to the people? claims that electricity
produced under the Bank-housed Clean Technology Fund (CTF) in Oaxaca,
Mexico, will be sold at a discount rate to the world’s largest
company, Walmart.

Still pushing for carbon markets
--------------------------------

The Bank’s push for forest and agricultural carbon markets (see
Update 77, 73, 59) was confirmed by the launch of the third tranche
of the BioCarbon Fund, set up to enable access to carbon markets for
the least developed countries with a focus on reforestation and
agriculture projects. The Bank also launched the new Carbon
Initiative for Development to enable least developed countries to tap
into carbon markets through carbon-credit-generating projects (see
Update 78).

During the summit, the Bank continued its efforts to drum up support
for "climate-smart agriculture", which includes a controversial
proposal to produce carbon credits from storing carbon in the soil
(see Update 78, 77). Concerned by the Bank’s activities, over 100
civil society groups, including ActionAid and Kenyan organisation
African Biodiversity Network, signed up to a letter asking African
negotiators to reject soil carbon markets. Simon Mwamba of the East
African Small Scale Farmers’ Federation said: "Climate-smart
agriculture is being presented as sustainable agriculture – but the
term is so broad that we fear it is a front for promoting industrial,
‘green revolution’ agriculture too, which traps farmers into cycles
of debt and poverty."

Despite the Bank’s push, no work programme on agriculture was agreed
in Durban. However, a compromise text was reached that requests the
UNFCCC’s scientific and technological advisory body to consider
issues related to agriculture at its next session in May.

Unclear on the concept
tinyurl.com/unclearconcept

Power to the people?
tinyurl.com/wdmpower

Soil carbon markets letter
tinyurl.com/wdmpower


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

8. Harvesting controversy: Bank’s agriculture projects under scrutiny

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

While the World Bank prepares to revise its agriculture strategy, its
focus on market liberalisation is criticised, its own complaints
bodies issue damning reports on agriculture projects in Peru and
Papua New Guinea, and critics fault its gender focus.

The Bank is preparing a new agriculture action plan to cover
2013-2015, which will follow its 2010-12 plan (see Update 69).
Meanwhile, a January report from the US-based think tank Institute
for Agriculture and Trade Policy and the Global Development and
Environment Institute at Tufts University argues that the Bank’s
initiatives "are too heavily focused on improving access to
liberalised markets and promote the expansion of high-input
agriculture rather than a transition to more sustainable methods."

Problems in Peru, Uganda
------------------------

In February last year, the Compliance Advisor/Ombudsman (CAO), the
Bank’s private-sector complaint mechanism, released an audit of
investments in Agrokasa, a Peruvian agribusiness which was accused of
depleting groundwater resources to the detriment of local farmers
(see Update 72). The audit found that the International Finance
Corporation (IFC), the Bank’s private sector arm, violated its own
performance standards, its policy on environmental and social
sustainability, its policy on disclosure of information and "its role
as a development institution."

The CAO argued that by "pursuing this investment before an adequate
environmental assessment had been prepared and reviewed, [the] IFC
... proceeded without taking into account potential negative long-
term and wide-ranging development impacts on other more vulnerable
users: impacts that could cause economic displacement,
impoverishment, and loss of access to potable water." It also said
that "the IFC struggles to align its strategic involvement in these
issues with its investment practices. This inconsistency undermines
the Corporation’s reputation and credibility."

In January, the CAO agreed to assess two complaints from affected
community representatives in Uganda (see Update 78), backed by NGOs
Uganda Land Alliance and Oxfam International, which claimed that IFC
forestry investments through a private equity fund "forced evictions
and displacement".

Meanwhile, in December the US-based NGO Oakland Institute released a
special briefing note which explains the various ways that the Bank
promotes private investment in agriculture (see Update 77), and
concludes that "by promoting investor access to land, [the Bank]
actually tends to threaten rather than improve food security and
local livelihoods in developing countries." The briefing also details
how the Bank has become an increasingly active proponent of
investment by private equity funds in this area (see page 3).

More complaints
---------------

Meanwhile, in December the Bank’s complaints mechanism, the
Inspection Panel, released its investigation on the Bank’s
smallholder agricultural development project in Papua New Guinea. The
project was intended "to improve community participation in local
development while increasing revenue flow from the already
established local oil palm production industry." However, the Panel
found that the Bank "failed to provide relevant information prior to
consultation in a culturally appropriate manner, form, and language
to achieve broad community support."

It added that the Bank "was not in full compliance with [it’s]
indigenous peoples policy and did not include critical means of
improving smallholder livelihoods." In response, the Bank’s board
agreed to a limited number of improvements, including strengthening
of the consultation process, and demanded updates from management
during implementation.

The CAO has also deemed a November complaint against a palm oil
plantation subsidiary of agribusiness conglomerate the Wilmar Group
eligible for further investigation. This is the third CAO complaint
against Wilmar, with previous ones having caused the Bank to rethink
its whole palm oil policy (see Update 76, 72, 71, 67). The
complainants "allege that the company invoked government forces to
dismantle a settlement on disputed land ... [and] that the company’s
actions are in contradiction to [the] IFC’s performance standards."

Gender gap
----------

In November 2011, US-based NGO Gender Action released three case
studies on Gender, IFIs and food insecurity, covering Ethiopia, Haiti
and Kenya. In Kenya, it examined three World Bank and two African
Development Bank projects and concluded that, "commendably, one
[World Bank] project promotes gender integration, collects sex-
disaggregated data and facilitates women’s participation throughout
the project cycle, but the other four projects, by failing to do so,
perpetuate women’s marginalisation in an industry [agriculture] for
which they provide the majority of labour."

The Ethiopia study of "four active World Bank investments that focus
on agriculture, land management and nutrition ... finds that not one
of these projects embraces a gender rights perspective or analyses
differential impacts on men and women, boys and girls." The studies
make recommendations for the IFIs, including to explicitly promote
women’s participation, collect and use sex-disaggregated data,
provide grants rather than loans and approach investments from a
women’s rights perspective.

CAO audit Peru 2011, CAO
tinyurl.com/caoperu


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

9. Green light for revised PforR, but concerns remain

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

The World Bank board approved in January a revised proposal of the
controversial new Program-for-Results (PforR) lending instrument (see
Update 77, 75), with some concessions to critics. PforR is designed
to allow the Bank to contribute to government-backed programmes as
part of pooled funding arrangements with other institutions and
donors, with the disbursement of funds directly linked to agreed
results.

Responding to legislative action by the US Congress and concerns that
PforR may replace a large share of project-based investment lending,
the Bank will limit the use of the new instrument to only 5 per cent
of total funding commitments per year for two years. Lifting this cap
and rolling out full implementation will be dependent on a "rigorous"
review of its performance. Civil society groups, such as German
political foundation Heinrich Boell, welcomed the cap, but concerns
remain around the independence of the review process that will be
used to determine whether it should be lifted.

Although the Bank has launched a safeguard policy review and
consultation (see page 4), the Bank’s assessment of proposed PforR
programmes will be based on "various country and programme specific
strategic, technical, and risk considerations." The Bank claims that
this approach will strengthen country ownership. However, Nancy
Alexander of Heinrich Boell argues that "there is no reason that
providing basic protections against fraud and corruption and basic
protections to prevent harm to people and the environment is
incompatible with country ownership. Quite the contrary: such basic
standards are necessary to deliver development results." Meanwhile, a
report from the Bank’s Inspection Panel’s, its public lending
complaints mechanism, was leaked. Reviewing one of the Bank’s country
systems pilots, the South African Eskom coal plant (see Update 73,
72), the report found "gaps that were not identified or addressed"
under this system and raised a number of problems with the project.

Confusion also remains around the status of ‘category A’ projects,
defined by the Bank as those "likely to have significant adverse
environmental impacts that are sensitive, diverse, or unprecedented."
The Bank defines sensitive impacts as those that "may be
irreversible" or raise issues covered by the Bank’s safeguard
policies on natural habitats, indigenous peoples, physical cultural
resources or involuntary resettlement. The board proposal clarifies
that this category is excluded from PforR, but this is not repeated
in the draft operational policy documentation, which effectively
governs PforR. Instead, it states that "activities that pose a risk
of potentially significant and irreversible adverse impacts on the
environment and/or affected people [...] are not eligible for
Program-for-Results financing", which could be interpreted to exclude
only category A projects with potentially irreversible impacts.

Program-for-Results, World Bank
tinyurl.com/wbpforr


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

10. Guest analysis - Unsafe haven? New IFC tax haven policy
    questioned

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

By María José Romero, LATINDADD/Task Force on Financial Integrity and
Economic Development

A new report finds widespread use of tax havens by clients of the
World Bank private sector arm, the International Finance Corporation
(IFC), while the new Bank policy is criticised for having major
loopholes (see Update 74, 73).

According to a recent report by Danish NGOs DanWatch and IBIS, "57
per cent of the companies analysed in the IFC’s extrac­tives
portfolio from 2010 have channelled their investment in developing
countries through an intermediate hold­ing company in a tax haven."
Additionally, "more than a third of the countries hosting [the] IFC’s
extractive projects have no specific policies on thin
capitalisation," which means that IFC’s extractive-industry cli­ents
can minimise tax payments in developing countries by injecting as
much debt and as little equity as possible into their operating
subsidiaries.

The report highlights the case of Minera Yanacocha S.R.L., one of the
largest gold mines in Latin America, 51 per cent of which is owned by
Newmont Mining Corporation, with Peruvian Buenaventura holding 44 per
cent and the IFC 5 per cent (see page 8). Newmont’s stake in
Yanacocha is held by an intermediate holding company called Newmont
Second Capital Corporation located in Delaware, where corporate
secrecy rules contributed to the US being ranked 5th in Tax Justice
Network’s financial secrecy index.

New policy on slippery ground
-----------------------------

In November last year, the World Bank Group released a new policy on
the use of offshore financial centres (OFCs). It aims at "advancing
the international tax transparency agenda by addressing the potential
risks posed to its private sector operations and to the global
financial system by jurisdictions with weak regulation, low or no
tax, and a lack of transparency."

The policy is largely built upon the results of the Organisation for
Economic Cooperation and Development (OECD) Global Forum peer review
process, launched in September 2009. As part of this process,
countries will undergo detailed assessment against 10 evaluation
criteria in relation to availability of and access to tax
information, and tax information exchange. The reports of the Global
Forum will inform the IFC board on whether to invest in a company
operating in an OFC.

However, civil society organisations say this peer review process has
shortcomings. According to a report by French NGO CCFD-Terre
Solidaire, "of the 59 reports published in 2011, only eight fulfilled
all the transparency criteria established by the Global Forum."
Moreover, there are no quantitative indicators to measure progress on
transparency and cooperation. Finally, no sanctions have been
envisaged to date for jurisdictions not complying with transparency
requirements and it is still unclear what next steps will be taken
once all the reports have been completed.

An alternative approach is needed

Civil society organisations have demanded changes in the IFC policy
in order to ensure that investing in private sector companies has a
positive impact on development.  According to Alvin Mosioma from Tax
Justice Network, "the IFC should stop channelling public funds to
companies using secrecy jurisdictions." To make effective and
measurable progress towards financial transparency, the DanWatch
report also recommends that "companies supported by IFC should
present their annual accounts on a country-by-country and project-by-
project basis, which would en­able host governments and civil society
to iden­tify tax avoidance and evasion."

DanWatch investigation of tax planning opportunities in IFC-supported
projects
tinyurl.com/escapingtaxes


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

11. New Bank infrastructure strategy: paving over development?

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

A World Bank infrastructure strategy update, developed because of a
G20 push for more infrastructure investment, reaffirms the Bank’s
commitment to large-scale projects and scaled up private finance
through public-private partnerships (PPPs, see Update 77), despite
questions about bloated costs and development impact.

The updated strategy, leaked in November 2011, outlines three main
pillars of future Bank infrastructure investment. The first is to
continue its more typical infrastructure projects, "while increasing
effectiveness in the areas of poverty, governance, gender and
knowledge."

The second pillar is a new focus on large "transformational" projects
that "maximise green, regional, and inclusive/broader development
benefits". These will also involve a greater diversity of financing
sources such as donor governments, including  new middle-income
donors; international  mechanisms such as climate funds; and the
private sector.

The third pillar aims to bring in "more private sector financing".
The International Finance Corporation (IFC), the Bank’s private
sector arm, is creating a new global equity fund for infrastructure
to "ramp up" business. The Bank is also implementing an action plan
to double private sector engagement in PPPs in infrastructure.

Familiar themes
---------------

These areas match the priorities of the G20 development working
group, a body of officials preparing plans for G20 development
ministers meetings (see Update 77). The final report of the G20-
commissioned High Level Panel (HLP) on infrastructure also emphasises
"transformational projects" and scaled-up PPPs. The G20-mandated
Infrastructure Action Plan, produced by the Bank with input from
other multilateral development banks (MDBs), lays out the role of
MDBs in this process. The Bank’s strategy is firmly in line with
these documents, outlining the role of Bank in the implementation of
this agenda. Both reports were made available after the G20 meeting
in Cannes in November 2011. Infrastructure is one of the three top
development priorities of the Mexican G20 Summit in June.

In a November analysis of the policy formation of the G20-MDB agenda,
Nancy Alexander of the German political foundation Heinrich Boell
notes that "hand-in-hand with the MDBs, the G20 has created a
mechanism to design and implement an infrastructure agenda with
minimal involvement by the governments and stakeholders of affected
low-income countries much less any democratic debate or processes."
She observes that "the Bank’s new strategy demonstrates the profound
impact of the G20 process on the MDBs, possibly leaving the 173
countries which are part of MDB governance, but not part of the G20,
by the wayside."

Transformation?
---------------

A November paper by UK NGO network Bond questions the developmental
impact of the G20 agenda. It argues that "the focus is very much on
infrastructure investment as key to economic growth rather than to
poverty reduction." It also says that "there is concern that the
involvement of the private sector may lack the appropriate safeguards
surrounding the social and environmental impact on local
communities." The report notes that an emphasis on PPPs implies a
danger of the "the privatisation of financial gains", while the
Heinrich Boell report argues that "many low-income countries are not
in a position to use scarce domestic resources to support the scale
or nature of infrastructure investments envisioned by the G20."

The Inga hydropower project in the Democratic Republic of Congo (see
Update 70, 67) is touted by the HLP as one of 11 "exemplary
transformational" projects. Peter Bosshard of NGO International
Rivers calls the first phases of Inga "an expensive white elephant
that hardly provides any benefits to the poor. Even the
rehabilitation that the World Bank is currently funding has turned
into a bottomless pit of mismanagement."

Bank and G20 documents
tinyurl.com/g20bankdocs

International Rivers Blog
tinyurl.com/riversblog


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

12. The World Bank and extractives: a rich seam of controversy

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

As World Bank projects fail to reduce corruption in the mining sector
in the Democratic Republic of Congo (DRC), International Finance
Corporation (IFC) investments in extractive industries are provoking
complaints and protests around the world.

In 2012 the Bank will launch its new extractives for development
(E4D) initiative, a "knowledge sharing platform" aimed at
transforming extractives into a force for development. One area the
initiative will focus on is corruption. Since 2001, the Bank has led
an expansive programme to increase transparency and stimulate
economic growth in the DRC’s mining sector (see Update 54, 50).
However, opaque sales of mining assets by state-owned mining
companies led the Bank to suspend all new programmes in the DRC in
late 2010. The Bank resumed lending in June last year when it judged
the government to be in compliance with a new transparency framework
agreed by the government and the Bank.

However, only a month later it came to light that state-owned mining
companies had again been secretly selling stakes in mining
operations, in one case at a sixteenth of their market price. Daniel
Balint-Kurti of UK NGO Global Witness said "the IMF and World Bank
have a responsibility to ensure that all financial support they give
to the DRC government is contingent upon the government demonstrating
that it is compliant with all its transparency commitments and that
gross corruption is not taking place."

Outcry in South America
-----------------------

The IFC’s 1999 investment in mining company Minera Yanacocha, owned
by mining giant Newmont, has again provoked controversy (see Update
53, 52, 43). In November 2011, an estimated 20,000 people in the
Peruvian state of Cajamarca demonstrated against Minera Yanacocha’s
proposed Conga mine, which included over 8,000 farmers blockading a
town. The government declared a state of emergency in Cajamarca,
suspended the construction of the mine and announced that it will ask
international consultants to review its environmental impact.

Meanwhile, Canadian mining company Goldcorp, which in 2004 received a
$45 million IFC loan for its Marlin mine in Guatemala, is the subject
of increasing scrutiny. A November research report by the Global
Development and Environment Institute finds that "local benefits are
a tiny fraction of total mine revenues and earnings", and the project
also poses "hazards related to cyanide and heavy metals contamination
of water" which "will undermine agricultural livelihoods,
impoverishing local communities."

CAO inundated
-------------

Of 20 projects with open cases at the Compliance Advisor/Ombudsman
(CAO), the IFC’s accountability mechanism, nearly a third are from
extractives projects. In December 2011, the CAO decided to transfer
the Maple Energy case to its compliance function, which will assess
whether IFC standards have been violated. The case follows a
complaint by two indigenous communities in Peru alleging that Maple,
which received $40 million in IFC support in 2007 for new oil
drilling, has failed to adequately consult with them, and through oil
spills from its existing sites has caused numerous health, social and
environmental problems.

The highly controversial Chad-Cameroon pipeline (see Update 62, 60,
56), which the public-sector arm of the Bank withdrew from in 2008,
also had a complaint deemed eligible for further assessment by the
CAO in December 2011. The complaint was brought by six NGOs on behalf
of over 25,000 local inhabitants of areas affected by the pipeline in
Chad. It argues that local communities "are excluded from the
economic and social trickle-down effects of the development of oil",
and face "the loss of a sustainable means of livelihood" and
"irreversible environmental impacts".

A November report by NGO Crude Accountability highlights three IFC
oil and gas investments in the former Soviet Union, which between
them have received 31 eligible CAO complaints. It concludes that "the
CAO failed to pursue systemic concerns such as violations of national
law or inappropriate project risk categorisation with IFC senior
management or the president of the World Bank Group."  The report
also noted that complaints centred on the fact that "the IFC, and
subsequently the CAO, assumed limited responsibility for projects
after project loans were dispersed or repaid." It also notes that
complaints frequently question whether there is sufficient
independence and impartiality within the CAO.

tinyurl.com/marlinreport

tinyurl.com/caoreport


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

13. Recommended resources 2011

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

Papers
------

Oakland Institute series on land grabs
www.oaklandinstitute.org/land-grabs-africa

Heading for the right choice? A professional approach to selecting
the IMF boss; Afrodad, Third World Network and others
www.brettonwoodsproject.org/art-568253

IMF performance in the run-up to the financial and economic crisis;
Independent Evaluation Office
www.ieo-imf.org/eval/complete/eval_01102011.html

World Bank, climate change and energy financing: something old.
Something new?; Friends of the Earth, International Rivers,
Groundwork and others
tinyurl.com/wbclimaterep

WDR 2012: gender equality and development - An opportunity both
welcome and missed; UNRISD
www.tinyurl.com/2012WDR

Labour standards in World Bank Group lending; ITUC
www.ituc-csi.org/IMG/pdf/Labour_StandardsEN_2011_web.pdf

Smoke and mirrors - A critical A critical assessment of the Forest
Carbon Partnership Facility; Forest Peoples Programme and FERN
www.forestpeoples.org/smokeandmirrors

Capital flows to developing countries in a historical perspective:
will the current boom end with a bust?; South Centre
www.tinyurl.com/southcentrep37

Sufficient recourse? Controversial oil and gas projects in the former
Soviet Union and recommendations to improve the CAO
www.crudeaccountability.org/en/uploads/File/Sufficient%20Recourse.pdf

Power surge: lessons for the World Bank from Indian women’s
participation in energy projects?; Bretton Woods Project
www.brettonwoodsproject.org/powersurge

A faulty model? What the Green Climate Fund can learn from the
Climate Investment Funds; Bretton Woods Project
www.brettonwoodsproject.org/afaultymodel

Time for a new consensus: regulating financial flows for stability
and development; Bretton Woods Project
www.brettonwoodsproject.org/afaultymodel

Books
-----

Legislating international organization: The US Congress, the IMF, and
the World Bank; Kathryn Lavelle, OUP USA

The political economy of development: the World Bank, neoliberalism
and development research; Kate Bayliss, Ben Fine and Elisa Van
Waeyenberge (eds.), Pluto Press


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

14. Petra Kjell joins the Project

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

We are delighted to welcome Petra Kjell as the new head of the
Project’s work programme on climate and the environment, human rights
and social impacts, taking over from Ama Marston. Petra has extensive
policy and advocacy experience in UK organisations, such as
Progressio and the new economics foundation (nef), as well as a
strong track record of advocacy and publications on climate change.
Petra has also worked in Tanzania coordinating the country office of
NGO Frontier. She holds a Masters in development studies from SOAS at
the University of London, and a Bachelors in social sciences from the
University of Stockholm, in Sweden.


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

15. IMF loan to Egypt branded as "odious"

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

In January, social movement Popular Campaign to Drop Egypt’s Debts
(PCDED) spoke out against the country’s military government agreeing
to a $3.2 billion IMF loan. Their press release argues: "the current
IMF loan for Egypt is an odious one as the current government does
not represent the Egyptian people ... even the donors realise that
the current government is not a legitimate one". The PCDED added:
"over the past two decades, the IMF has been involved in drawing up
and implementing the main economic and financial policies of Egypt,
which led to low living standards, high poverty rates, and
deterioration of public services and human resources development".

facebook.com/DropEgyptsDebt


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

16. HIPC winds down amid controversy

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

The World Bank and IMF’s joint Heavily Indebted Poor Countries (HIPC)
initiative is winding down as its objectives "have largely been
reached". A late November IMF board meeting has agreed to maintain
the eligibility of only some countries currently eligible for HIPC,
but essentially closed the programme to new countries and ended
reporting on its implementation. Seven countries that have completed
HIPC and eight low-income countries deemed ineligible are still
judged to be at high risk of debt distress. Tim Jones of UK NGO
Jubilee Debt Campaign did not lament the end of the programme, which
he says "has helped to enhance the power of the IMF and World Bank to
determine economic policies, and allowed private creditors off scot
free."


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

17. ICSID offers "impunity" for corporations

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

In October 2011, global civil society coalition Seattle to Brussels
Network held an international week of action against bilateral
investment treaties. Their final declaration calls the World Bank-
housed International Centre for the Settlement of Investment Disputes
(ICSID) part of "an architecture of impunity for transnational
corporations (TNCs) [which] undermines the sovereignty and
constitutions of both developed and developing countries, democratic
governance and peoples’ interests." It calls for "the withdrawal of
states from ICSID and other arbitration processes." After five years
of threats, Venezuela, which has almost 20 suits pending at ICSID,
formally withdrew from the institution in January, claiming its
membership threatened "national sovereignty".


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

18. Bank loans linked to child mortality

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

A June 2011 academic paper that analysed health outcomes in Sub-
Saharan Africa found that "when a country is under a World Bank
structural adjustment loan it tends to have higher levels of child
mortality". The analysis of 31 countries over 15 years found that the
Bank requires nations to cut health provision, which leads to reduced
access to health services and, over the long-term, reduces government
capacity to react to public health problems. The paper called for
greater debt relief and "eliminating certain macroeconomic policy
reforms, especially privatisation of government assets, which often
limit access to health, education, clean water, and basic sanitation
via higher user fees".

tinyurl.com/SAPsmortality


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

19. Bank-funded "toxic dumping ground"

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

In November 2011 Ugandan newspaper New Vision called attention to the
"horrific sanitation conditions" of a World Bank-funded waterway in
Uganda, calling it a "toxic dumping ground". The Bank’s International
Development Association (IDA), its low-income country arm, lent $22.4
million for the construction of the Nakivubo Channel waterway, which
runs through the country’s capital Kampala and "regularly floods
polluted water into people’s homes, causing damage and disease",
according to the newspaper. It also reported that locals employed to
clear the waterway are not provided protective gear and not paid
enough to treat illnesses they contract as a result. The workers also
complain of the illnesses being spread to their children, the paper
said.


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

20. Questions hang over Bank safeguard review

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

The World Bank has revealed that the planned period for updating its
environment and social safeguard policies, which it aims to
consolidate into one single policy, has been extended to December
2013 (see Update 77). However, 130 organisations, including Asia
Indigenous People’s Pact wrote a letter to the Bank in October
calling for the indigenous peoples’ policy to remain a stand-alone
policy that respects the concept of "free, prior, informed consent".
NGOs are also concerned that a new lending instrument, Program-for-
Results, is to be exempt from safeguards (see page 6). Consultations
on the safeguards review are anticipated for the end of 2012.


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

21. Complaint against IFC in Mozambique

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

The Compliance Advisor Ombudsman (CAO), the International Finance
Corporation’s (IFC) accountability mechanism, has transferred a
complaint over an IFC-supported aluminium smelter in Mozambique to
its compliance function, which will assess whether the project has
breached the IFC’s performance standards. Mozal, which operates the
smelter, received $135 million in equity and loans from the IFC
between 1997 and 2001. A coalition of NGOs claimed that Mozal’s
activities "will result in harmful exposure to people and the
environment", and also questioned "the environmental and social due
diligence undertaken" and "the lack of access to and disclosure of
information."


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

22. Transparency at the Bank questioned

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

The International Development Association (IDA), the World Bank’s
low-income country arm, appeared at the top of NGO Publish What You
Fund’s 2011 Aid Transparency Index. IDA’s transparency is, however,
only rated as "fair" by the assessment published in November 2011.
The transparency policy of the Bank (see Update 68) has been
criticised by a December report of the NGO network Global
Transparency Initiative (GTI), which singles out the exceptions given
for protecting the commercial interests of third parties and internal
deliberations. These "serious problems" can be resolved by adopting
the best practices applied at the national level, and "applying a
strong public interest override", said the report.


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