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IFI governance

News

Green light for revised PforR, but concerns remain

7 February 2012

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. Over 200 organisations, including Third World Network and the International Trade Union Confederation, wrote to the Bank in October last year to voice their concerns about PforR.

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. Furthermore, according to Nancy Alexander of Heinrich Boell, “while the PforR documentation touts the expansion of transparency through use of the instrument, the draft operational policy makes no promises to inform affected groups of anticipated projects.” Titi Soentoro of Indonesian NGO Solidaritas Perempuan (Women’s Solidarity for Human Rights) said “an assessment of a quality of a country’s system will be meaningless without assessing the political aspects within an environment and social assessment. Without looking at people’s rights aspects, the environment and social assessment of PforR is only window dressing.”

Moreover, there are civil society, business and industry concerns around the replacement of binding anti-corruption policy and environmental and social safeguards with less clear commitments. Although the Bank has launched a safeguard policy review and consultation (see Update 79), 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, Alexander 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.”

While the Bank admits that PforR will contribute to the broad agenda of country systems, it argues that it’s different from its country system pilots that have proved controversial. One of the pilots, the South African Eskom coal plant, was brought to the Bank’s Inspection Panel by civil society groups in April last year (see Update 73, 72, 70). A leaked copy of the investigation report showed that the panel’s findings “point towards gaps that were not identified or addressed” under this system and raised a number of problems with the project, including concerns around “significant water consumption raising issues of both scarcity and pollution in the local area.”

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”, and that “may affect an area broader than the sites or facilities subject to physical works.” 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. In contrast to earlier drafts which were ambiguous about category A, the board proposal clarifies that this category is excluded from PforR, but this is not repeated in the draft operational policy documentation available to the public, 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.