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IFI governance

News

Access for the poor?

World Bank's infrastructure approach under increased scrutiny

3 July 2012

As the G20 and the World Bank continue their push for increased investment in large-scale public-private led infrastructure projects, further scrutiny of the Bank’s track record puts its strategy in question.

The declaration from the G20 summit in Mexico in late June reconfirmed the group’s support for investment in infrastructure as “critical for sustained economic growth, poverty reduction, and job creation”, and welcomed the “strong progress” on the implementation of the recommendations of the report of the G20-commissioned High Level Panel on Infrastructure (HLP) and the multilateral development banks’ (MDBs) Infrastructure action plan (see Update 79, 77). Furthermore, the G20 stressed that, while public financing of infrastructure projects “remains essential”, it “should be complemented by private sector investment”.

The G20 “welcome” the Business 20′s (a G20 related event aimed at providing recommendations from the private sector) Green Growth Action Alliance, a new public-private partnership (PPP) initiative launched in June to address the “shortfall in green infrastructure investment”. According to Nancy Alexander of the German political foundation Heinrich Boell this “would dramatically scale up the use of public money to offset the risks of private investment”. A June report by Boell and NGO WWF, focusing on energy infrastructure in Africa, states that “often, PPPs leave the issue of universal access to poorly funded governments and under-financed utilities to solve.”

NGO International Rivers questioned the approach of the G20 and the Bank in its May report Infrastructure for whom? While the report acknowledged the importance of infrastructure for prosperity, it noted that large, centralised infrastructure, especially large hydropower dams, more often benefit energy-intensive industries than the poor. Furthermore, the report said that the focus on “increased public support for private infrastructure projects” is contrary to the Bank’s own findings. A 2003 Bank assessment found that “the poor are often the last to benefit from increased access” and “tend to be overlooked” by private operators (see Update 36). Furthermore, the Bank’s updated infrastructure strategy (see Update 79) concluded that the results of “expected ‘trickle-down effects’ … have been slow.”

The International Rivers report calls for infrastructure projects that are decentralised, participatory, transparent, accountable, carried out under “the strictest social and environmental safeguards” and addressing the basics needs of the poor directly, rather than relying on a trickle-down approach. They should also be devised “to strengthen climate resilience rather than increasing climate vulnerability.” While the report agrees that private enterprises “have a big potential to supply equipment” that address the needs of the poor, as investors they “play a minor role in developing infrastructure projects for poor consumers”. Instead, the report suggests that new funding mechanisms for innovative, small projects should be considered.

“Exemplary” projects questioned

The G20 strategy is further criticised in a second June report by Boell and the US-based Ford Foundation, including criticism of the “exemplary projects”, as defined by the HLP and the MDBs. This identification is based on six criteria, including “regional integration” and “private sector potential”, but none that explicitly refers to issues around poverty alleviation or environmental sustainability. The report finds that centralised solutions are overemphasised, noting that “a ‘bigger is better’ approach does not imply sustainability”. It also argues that some of the “exemplary” projects “have enormous carbon footprints”. This runs counter to the Bank’s new focus on ‘green growth’ (see Update 81), where it argues that “getting infrastructure ‘right’ is at the heart of green growth [and] is critical because infrastructure choices have long-lived and difficult-to-reverse impacts on the carbon, land, and water intensity of future patterns of development.” Furthermore, the report argues that the projects have an “over-emphasis on PPPs”.

One of the 11 “exemplary projects” identified by the HLP is the “Ethiopia-Kenya interconnector”, a power transmission system devised to transfer hydropower electricity from Ethiopia to Kenya and link to the broader East African region. The Bank support for this project has led NGOs to assert that it is effectively funding the highly criticised Ethiopian Gibe III Dam, a project the Bank has declined to fund directly due to its violation of Bank policy (see Update 71).

In May, a letter to then Bank president Robert Zoellick from nine NGOs, including Friends of Lake Turkana in Kenya and the US-based Oakland Institute, called for the Bank to “not fund a transmission line that would source its power from the Gibe III Dam or from any other project that massively violates its safeguard policies.” The letter also notes that East Africa is already “over-dependent on hydropower generation”, leading to increased risk under climate change and that “the project’s impacts on the region’s climate resilience need to be assessed”. In a June reply to the letter, the Bank’s director of sustainable development for Africa, Jamal Saghir, confirmed that the project “will draw power from Ethiopia’s national grid, to which … Gibe III could initially contribute up to 20 per cent”. Ikal Angelei of Friends of Lake Turkana urged the Bank to consider projects that would help people in the region, rather than enable a dam that could destroy Lake Turkana: “People depend on the lake. We need development projects that will benefit us, not kill us.”

Another “exemplary” project is the highly controversial Grand Inga Dam in the Democratic Republic of Congo (see Update 70, 67, 56), “with the objective of gradually developing its potential, and providing the necessary transmission links to ensure that the power produced can benefit both DRC and the surrounding region through power export.” The dam is estimated to have a generation potential of “almost double that of the world’s largest hydro-project”, leading the HLP to draw the conclusion that it “offers the most cost-effective source of power currently available to Sub-Saharan Africa”. However, according to Interntational Rivers billions of dollars of aid money have already been spent on dams and transmission projects on the Congo River, yet 94 per cent of the population still has no access to electricity. Zachary Hurwitz of the NGO said: “The G20 leaders should prioritise investments that directly address poor peoples’ needs rather than using taxpayer money to pay for huge, high-risk projects whose private sector returns rarely trickle down.”

The impacts of the Bank’s role in hydro projects have long been criticised, with some cases yet to be rectified, such as its involvement in the Chixoy hydroelectric dam in Guatemala (see Update 54, 47, 43). In December 2011 three organisations, including Rights Action and the Global Initiative for Economic, Social and Cultural Rights, filed a petition before the Inter-American Commission on Human Rights in a renewed attempt to hold the Bank and the Inter-American Development Bank accountable for human rights violations that occurred during the construction of the dam in the 1980s, claiming that no reparations or compensation have been provided. The Inter-American Court of Human Rights held a hearing in late June to further assess the case.

In March, the Bank approved a $132 million loan for yet another controversial hydro project, Cameroon’s Lom Pangar Dam. NGOs, such as the US-based Bank Information Centre (BIC) and International Rivers, argue that the dam will have significant environmental and social impacts and make the country even more vulnerable to drought and climate change, due to its already high dependency on hydro power. According to BIC, the dam “appears to respond to the energy demands of the expanding aluminium sector rather than the energy needs of the majority of the country’s population lacking access to electricity.” Furthermore, the benefits of Laos’ largest hydroelectric dam, the Bank and Asian Development Bank funded Nam Theun 2 (see Update 63, 59, 56, 45), have been questioned, with a relocated villager claiming that they “are now living near the dam but … have no electricity, no clean water”. However, the Bank has refuted this claim, arguing that “every household in those [resettlement] villages has an electricity connection and improved water supply.”