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IFI governance

News

Harvesting controversy

World Bank's agriculture projects under scrutiny

7 February 2012

While the World Bank revises its agriculture strategy, its market liberalisation focus 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 Update69). To date it has not said whether consultations are planned, nor when it will agree the new plan.

Meanwhile, a January report Resolving the food crisis: assessing global policy reforms since 2007 from US-based think tank the Institute for Agriculture and Trade Policy and the Global Development and Environment Institute at Tufts University paints a balanced picture of recent Bank agriculture policy and practice. “On the positive side”, the report notes, “the Bank reasserts the importance of agriculture for development” and “also recognises the prevalence of market failures in the sector”. However, overall, the report 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.”

Furthermore, “against a backdrop of community objection, commercial pressure to expedite the project, and an absence of effective IFC management support, the professional advice of IFC’s environmental and social specialists was effectively overruled.” The CAO 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.” The CAO will continue to keep its audit open until convinced that the actions taken by the IFC in response to the findings are satisfactory.

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” and raised “broader concerns about the due diligence surrounding the project.” After investigating further, the CAO may attempt to facilitate settlement, or consider whether to launch a full-scale investigation.

Meanwhile, in December 2011 the US-based NGO Oakland Institute released reports on the second phase of its multi-country study on Understanding how land deals contribute to famine and conflict in Africa (see Update 77). It summarises the role of the World Bank in 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 Update 79).

In contrast, an IMF working paper released in November last year, What drives the global land rush? attempts to analyse available data to determine the main factors behind the rise of the land grab phenomenon. The authors conclude, “surprisingly”, that “the quality of the business climate is insignificant whereas weak land governance and tenure security for current users make countries more attractive for investors.”

More complaints

Meanwhile, in December 2011 the Bank’s public lending 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 the [Bank'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, Gender Action 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.” 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.

GAFSP

Meanwhile, in October 2011 the Bank-housed Global Agriculture and Food Security Program (GAFSP, see Update 71, 69, 68) issued its first annual report. The report shows that by June 2011, the programme had received $511 million of the $897 million that donors had committed for its public sector window and $50 million out of $75 million for its private sector window. The vast majority of the shortfall was owed by the United States.

The Bank is the supervising entity for $312 million of the funds already allocated by the GAFSP steering committee – 65 per cent of the $481 million total allocation. The government or private sector implementers of the project must follow the rules and policies of the supervising entity, which also receives a fee of up to 5 per cent of the total grant.

Meanwhile, an updated Food price watch report published on the Bank’s website in November last year concludes that “global food prices remain high and volatile”. Despite discussing the global and national reasons for price volatility in depth, the report does not once mention the impact of financial speculation on volatility, despite many analysts suggesting this can be a major factor (see Update 77).