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UK complacent about World Bank failings

Lax DFID report lacks plan for progress

26 April 2010

In its annual report, the UK’s Department for International Development (DFID) highlighted serious weaknesses in the World Bank’s work on gender and the financial crisis, but overlooked failings on health, climate impacts and governance reform.

Released in late March, DFID’s annual report on its work with the World Bank reviews progress against annual objectives and lays out priorities for the next year. It is said to be guided by the 2009 white paper on development (see related article).

The report falls short of the level of scrutiny that might be expected from the largest donor to the last replenishment of the World Bank’s International Development Association (IDA, see Update 69). Overall DFID is strongly supportive of the Bank, often uncritically repeating the institution’s own positive self-evaluations.

Patchy performance

IDA’s performance on DFID’s priorities for 2009 – crisis response, environmental sustainability, aid effectiveness, gender equality and governance reform – is said to be “mixed”. The assessment is somewhat impressionistic given the lack of specific targets on several of these areas against which to judge any progress.

DFID argues that there has been progress on decentralisation of Bank staff and removing conditionality. No mention is made of the continuing preference given to deregulation and tax cuts, irrespective of social and economic impacts, by the Bank’s private sector arm, the International Financial Corporation (IFC), in its influential country rankings in the Doing Business report (see Update 67).

Gender work receives the sharpest criticism, with DFID saying, “in its core work, the Bank does not demonstrate strong commitment to addressing the inequality and discrimination faced by women and girls” (see Update 69). DFID intends to address these concerns by setting specific targets for the next IDA period, and through the development of the Bank’s new Gender Action Plan, though the last plan was widely decried (see Update 57, 54).

The Bank also still has “some way to go” in providing effective support to fragile states, according to the report, particularly with regard to the management of multi-donor trust funds. However, the way forward is not set out in any detail.

Much of the report is devoted to the Bank’s response to the global financial and economic crisis. It notes that “resources did not follow need”: disbursements to low-income countries only increased by 1 per cent in 2009, demonstrating an “inadequate speed of response”. It congratulates the Bank on the slight increase in disbursements since mid-2009, failing to acknowledge that a rise was planned before the crisis struck (see Update 68).

Inefficiency appears to be a problem more generally: the UK, along with the US, France and Italy, refused to support an increase to the administrative budget that had been requested by Bank management. Having “pushed the Bank to take a hard look across its operations to identify savings [… the UK] found the Bank’s approach to be limited” and rejected the request.

Complacency on health and climate

However, DFID displays misplaced confidence in the Bank’s performance in health, saying the “Bank has shown that it is willing to respond to the lessons highlighted” by the Independent Evaluation Group’s highly critical 2008 report. In a major oversight, no mention is made of the two reports last year showing a further decline in performance, with only half of projects achieving satisfactory outcomes – and a quarter in Sub-Saharan Africa (see Update 66). There is also no discussion of how much progress has been made towards last year’s white paper target for at least 80 per cent of new health support to be joined with other donors or use country systems.

The DFID report roundly endorses the Bank’s activities relating to climate change, despite other governments and civil society organisations having raised serious concerns about misleading reporting of investments in fossil fuels and renewable energy (see briefing). There is no mention of the Bank’s Independent Evaluation Group having condemned its “weak” efforts to mainstream environmental considerations last October (see Update 68). Also missing is any reference to the Bank having suspended new investments in palm oil last August, after its watchdog, the Compliance Advisor Ombudsman, reported that commercial interests were being pursued in violation of human rights and environmental concerns (see Update 67). With both climate and health to remain priorities for DFID in 2010, civil society organisations will hope to see a more rigorous approach.

2010 priorities vague

DFID fails to spell out a clear list of priorities for the rest of this year, but mentions governance reforms, financial contributions to the Bank, and increasing its responsiveness to clients. With the first two largely decided at the spring meetings (see analysis), DFID is far from attempting to drive the future agenda.

Ambitions for governance reform remain inadequate, despite being described as a continuing priority for DFID. There is no comment on whether the 3 per cent shift in vote to developing countries, agreed at the spring meetings, is considered sufficient. Future commitments are vague, involving only “more say” for developing countries and a formula for deciding voting shares that takes into account contributions to IDA and the “central role” of borrower countries “in ensuring that the Bank fulfils its mission of tackling poverty”.

Institutional reforms amounting to an attack on the power of the Bank president are prominent. The report calls for governors – ministers from shareholder governments – to set the Bank’s strategic direction; annual performance assessments of senior Bank management; and independent chairing of the board (a role now played by the Bank president). A capital increase and IDA replenishment should be accompanied by increased effectiveness, though again detail about what that means is thin on the ground.

There are some specific, but modest, steps to “make the Bank more responsive to clients”, including basing more senior Bank staff in Africa and cutting project approval times. There is no commentary on the Bank’s quiet manoeuvrings to reform its lending instruments, despite concerns that changes could undermine scrutiny of projects and the application of social and environmental safeguards (see Update 70).

Also missing is any discussion of the IFC’s ongoing review of social and environmental performance standards. The standards have been subject to intense criticism from civil society, particularly on their lack of attention to climate change, community consent and human rights (see Update 67). Indeed, despite DFID’s professed commitment to human rights, the report includes no mention of rights at all.