James Alawi, IFID
Stephen Sabey, IFID
Phil Stevens, UKDEL
Luiz Vieira, Bretton Woods Project
Bruce Liggitt, RSPB
Helen Tugendhat, Forest Peoples Programme
John Garrett, WaterAid
Amy Dodd, UK Aid Network
Polly Meeks, ADD International
Kate Geary, BIC Europe
Preethi Sundaram, IPPF
Alison Doig, Christian Aid
Gideon Rabinowitz, Oxfam GB
- UK update and priorities
- Forward Look
- Shareholding Review
- President selection process
- CSO priorities
- World Bank and climate change
- Forests and climate change: DPL & FIs
- IFC and OFC tax policy
- UK update and priorities
- CSO priorities
- Thematic coherence and SDGs
- IDA lending & aid effectiveness
- UK contribution
- Thematic coherence and SDGs
UK updates and priorities
- Not much to say – it is still expected to come out soon as Secretary of State said in front of the International Development Committee. Was due to be released on her first day as Minister – took the summer to read and review.
- As we understand it, the content will not change but the overarching narrative will be adapted. New ministers have new priorities, and these will be picked up in the new overarching narrative allowing for a review of how those fit into the new government’s agenda – efficiency and effectiveness of the system.
- New ministers’ interests in particular seem to be value for money and transparency. This implies continuation but expect to see some strengthening of that focus.
- Question on whether the CSPR, MAR, BAR and research review will all come out together.
- Hope that they will come out in the coming weeks.
- Forward Look
- Trying to find out what they could share ahead of this meeting – priorities still being set.
- IDA and forward look very interlinked – chance to think about the Bank we want to see.
- Three priority areas divided as follow:
- Conflict and fragile states – IDA
- Efficiency and effectiveness – better more agile and responsive. Safeguards and revised procurements framework – better and less tick-box exercise. Pushing for indicators on how performance is measured – scorecard and IDA measurement. High risk vs low risk programmes, etc. Seeking areas for improvement.
- Crisis response window in IDA, better response on crisis displacement, refugees, etc. Want more coherent system of programmes and approaches, DRR and prevention.
- Resourcing, allocation and pricing. Willing to consider a large capital increase in IBRD as long as it goes to the poorer countries in IBRD – looking for a concrete commitment to lend to lower income countries. Essential if we’re going to meet the SDGs – countries at the top shouldn’t not be getting loans but need to think about approach – how to be catalytic, etc. Big part of that is around pricing – i.e. how does the Bank price its loans so the countries that borrow, can afford to pay? How much is Bank expertise, etc. worth.
- Private sector – looking for post-Addis delivery of billions to trillions. Action plan for the WBG to leverage finances, investments in the poorest countries, focus on bankable projects.
When will be able to see the Forward Look documents and have opportunities for input, etc? It is unfortunate that civil society has been unable to contribute to the process, particularly as it is one of the principle agenda items at annuals.
Looked into this per UKED commitment – previous papers that went to the board weren’t for decision so not for publication. There is something in the Forward Look in the public domain so will send something to us afterwards.
Papers that go to the governors for decision will go on the website and the public domain. Not sure which but agree that there should be as much transparency as possible so will come back on that. Some elements are a little more controversial so not sure if agreed by board that they can go out and will inform CSOs.
- Shareholding Review
Board reached a decision recently regarding weight to be used in review as follow: 20% IDA, 80% economy. UK wanted a stronger weighting to IDA but there just wasn’t the space for that open discussion.
Developing countries didn’t see an increase in their share.
Two ways in STI process that we can improve that:
- Redistributing shares that members do not take up for bearance – principles, rules based approach for doing that. Currently thinking through the implications of that option.
- Next steps – A month or so after annuals, discussions on special capital increase will move forward as everyone finishes taking stock.
- Opportunity to try to ensure that the smallest and poorest countries aren’t losing out. Once final contributions are agreed, the proposal will go to Governors for approval.
How often do votes actually take place on complex issues such as voting rights and capital payments? It seems that issues are normally decided by consensus.
There have been votes, about seats on the board. Politics about constituencies and size of group.
A defeat of proposals by vote would clearly represent something of a failure of the process, but votes are technically required. EDs generally try to ensure sufficient support before issues go to a vote in meetings. No one wants to bring anything to the board that the major shareholders won’t support.
- President selection process
- Pleased that there was a process after Jim announced his interest. There was 3 weeks for nomination, expect in the next week or two there will be a board interview and Jim will be reconfirmed.
- UK is not deaf to the concerns of some, not least some WB staff, about the way the Bank has been managed and this will need to be addressed going forward. The UK remains a champion of open, competitive and transparent procedures in the WB and other institutions
The process was totally at odds with Bank’s rhetoric and promotion of transparent, meritocratic processes. Realise this is not a surprise but to CSOs want to state its continued concern. President Kim’s reappointment process represents a step back from last, which was far from perfect.
- World Bank and climate change – rhetoric vs. practice
Christian Aid (CA):
- CA will host a side event at the Annuals in which DFID will participate. CA published report focused on how quickly are the banks responding to the drive towards a zero carbon world.
- The WB’s performance was rated as an F, despite the public rhetoric and positions – problem is real policy and practice.
- Hoping to get a reaction from the Bank to show what they are doing and what steps they are taking to move out of high carbon infrastructure, etc. to deliver Paris and SDG7. Preference would be a clear strategy but open to discussion and debate. Strategy talks about positively supporting countries to deliver their COP21 commitments. It would be great to see the Bank focus their attention on support to national contributions.
- Thank you, the report is very useful and timely. UK has not yet had time to digest the report, but this is one of the issues in the IDA replenishment discussion.
- Forest and climate change DPL & FIs
- BIC with partners have looked at more hidden forest and climate footprint, 2 reports to be released. Brief findings – both forms of lending are supporting massive coal development, IFC alone has bankrolled 40 coal projects since the 2014 ‘no coal’ announcement. World Bank investments are basically a fossil fuel subsidy.
- One specific question from last meeting – application of safeguards across WB lending and in particular with development policy lending.
As you know there are safeguards but they differ from direct lending. The Bank will undertake a retrospective to look at how we make the Development Programme Lending (DPL) safeguards consistent with the safeguard framework.
- FPP will organise an event at annuals and will send invite. Also wanted to note that UKED is moderating a panel on indigenous people’s rights at annuals – welcome and pleased.
- On forests, FPP is looking, in investment going forward, is better monitoring of the results and impact on forests including in particular through non-forest lending. Social and environment indicators. In the context of the new ESF, how is the Bank going to improve on the oversight and implementation challenges?
- Finally, how did the decision to waive the application of the Indigenous Peoples Policy in Tanzania happen? This resulted in a failure to protect forest peoples’ rights without their participation and was a very risky decision. Process up front needs to be better.
- There will be two events at the Annuals on the implementation of the ESF, one for governments and one for CSOs.
- Regarding the waivers of indigenous peoples’ policy, UK hopes that adjustments to ESF7 will mean Tanzanians will not be requesting waivers, but will keep a watching brief on that.
- IFC OFC tax policy
- CSOs are concerned about the lack of IFC specific tax policy beyond financial centres policies. Particularly in light of Panama Papers and research highlighting the cost of aggressive tax evasion to developing countries. CSOs see this as a real source of concern for developing countries.
- Given that IFC has a development mandate, it should look at use of aggressive tax schemes from a safeguard point of view and should not invest in companies that engage in aggressive tax schemes. Looking for EDs and others to take a much more proactive and aggressive approach to addressing this and tackling. Good to hear that President Kim recognises this problem, but Bank continues to drag its feet on implementation.
- There is a governance component of the work that IDA, this provides an opportunity for the IFC to create indicators on tax behavior, which could be used by IDA as guidance.
- There are two issues at hand: one is illicit cash flows (illegal); and the other is strictly legal but very harmful from a development point of view. The IFC could work to set standards for good practice in tax collection and use.
To complement this – President Kim has always stressed the importance of all parts of the Bank working together, which is a positive thing. There is however a glaring inconsistency if the IFC can act in ways that encourage tax evasion, while IDA is fighting tax evasion for public receipts and focusing on domestic resource mobilisation
Suggests a meeting to discuss the issue maybe after annuals.
UK update and priorities
What has the UK been looking for out of IDA 18? What are the challenges it faces and what is the UK doing to overcome them?
- Priorities have focused on the 5 special themes, fragile states (where we would like to see the Banks scale up its lending). We have seen a doubling of the financial allocation for these countries, and we are now interested in seeing if the Bank is capable of delivering on that. The Bank offices are often smaller in these countries, delivery is harder, so we are working behind the scenes to see the Bank is supporting the creation of absorptive capacity in fragile states.
- We are also prioritising gender and good implementation of this, and also job creation including for refugees.
- We also want to see IFC and MIGA doing more in fragile states. We are looking forward to the deputies’ report on this, which is coming out after the Annuals, and that contains commitments that we pushed for on dealing with inwards and outward migration.
- We are also prioritising climate change, and in particular the investments that will underpin the delivery of the Climate Action Plan. We are glad to see the Bank looking at illicit finance flows in the governance theme, and also having the WDR on governance which we view as a good product.
- We want to see more attention to crisis situations, including through the new crisis lending window, and a new refugee window of lending. The UK also wants to see ‘more for more’, if countries do more to integrate refugees than they may receive more financing for refugee support.
The Bank’s work in fragile and conflict-affected states is a priority for DFID.
What scale is being discussed for the refugee window?
2 – 2.5 billion dollars over IDA18. The other priority concerns support for countries that are graduating out of IDA. IBRD is cash constrained right now, but we want to see continuing levels of financing after graduating to smooth the transition into IBRD lending. This should be coming from IBRD though, and a focus for that part of the Bank.
The big push for DFID has been how much is allocated to different countries throughout the Bank, our vision is that we want the Bank to carry on serving countries throughout the income chain, but we do not want that to be at the expense of poorer countries. There was a proposal to use IDA resources to countries which have graduated into IBRD, but we disagree with that, and we want to see that graduating countries are using IBRD resources and not IDA resources.
One of the red flags for CSOs is that talking about ‘cost effective’ can act to hide the need for reasonable investments for outcomes and results. Sometimes the need to be cost effective can result in shrinking administrative input and diminishing local analysis and understanding, therefore resulting in poor outcomes.
This is why the UK’s own position was that spending more money for IDA lending, including local staff office and support costs is considered a good thing.
Participated in a panel with UKED Melanie, and support the same position. Will you make your division of funds clear between IDA and IBRD?
The process does not work like that, the commitments are made in different processes.
- Thematic coherence and SDGs
- The SDGs for the UK are all about sustainability. We are focused on how to change operations to build systems sustainably. How can the Bank invest in agriculture, or water systems or other areas, in a manner in which will still be around in 5 years. We can ensure this in part through demanding better implementation and monitoring of outcomes.
- The UK is aware that there is a need to integrate activities and thinking, so that investment decisions are coherent. Things like the Gender Action Plan, which we were pleased with, did link up with other areas of Bank action and investments.
Is there any opposition in the board to the vision that the UK has about use of IDA funds in this way?
In May you said the UK was focused on the idea of leaving no one behind, I’d like an update. And then on indicator work, will there be specific focus on disability in the indicators work? It would be a missed opportunity if there are none.
- We pushed for this very explicitly, and there was disaggregation of indicators but insufficient so we are asking for more, including by disability.
- Disaggregating indicators by disability seems like it might be a step too far for the Bank, and perhaps inclusion of relevant items on the Corporate Scorecard could work better. Household Surveys are another tool that can be used, which could usefully draw on the Washington Group questions to generate data on disability, as this would be more transformative than focusing on the indicators.
- The UK is out far ahead of most other Board members on this, making it difficult to progress the issue. With Board members, it is just not high on their priority lists. With Bank management, we have encouraging discussions with them but it seems to be moving slowly. When we launched our disability framework, they said they wanted to do the same, but there are only now beginning to set up a similar framework.
- IDA lending & aid effectiveness
Specific to the UK, the UK has taken a position that it will provide resources will be provided in a loan form to IDA, to take the case of Ghana, or Zambia, or Mozambique, these countries have unsustainable debt balances. We see the UK loaning funds to IDA, and we don’t understand this approach, previously the UK has provided grant financing, and now the UK is proving funds as a loan.
- With regards to loans versus grants, IDA17 was the first possibility for countries to make loans to IDA instead of grants. There was a concern when this was introduced that countries would substitute their grants with loans, and rules were put into place to prevent this. One of the rules was that any loan to IDA17 had to be on-top of the level of contribution given in IDA16 to avoid substitution. Now with IDA18 that principle is being carried through, so there can be no lessening of the grant contribution. The point was to increase overall resources available to IDA.
- The fact that IDA has been receiving concessional rate loans has had no impact on the rates it is then charging countries for loans.
- It is likely that IDA18 will be much larger than previous replenishments. Because of this, there may be a window opening where countries may be able to get non-concessional lending from IDA as well as the traditional concessional lending. We support this because some countries are not able to fully fund their development needs from their allocation from IDA, and have no access to IBRD funds. So we support the idea of providing non-concessional lending at rates lower (much lower) than market rates to enable IDA countries to access more funds than their allocation.
- IDA has also very strong rules about debt sustainability. If countries are at high risk of unsustainable debt then all IDA money is grant, moderate risk allows low concessional loans, and only with no risk of debt unsustainability. The most recent additional allocation to IDA was part of IDA17, and this was because IDA17 had some unexpected draw downs, Ebola emptied the crisis lending window, refugee issues in Jordan and Syria as well, so the situation was restricted cash for high needs. The UK therefore made a voluntary additional contribution.
You argue that the new lending possibility does not make any difference because the allocation for grants does not change. But we have a concern about an increase in loans, because there are a number of countries that are not in debt crisis now but are heading along that road. I don’t see this as such a clear win-win. There is a general trend towards more loans and less grants, and I can’t see that it can be sustainable in the way that you suggest.
The UK is not shifting towards loans rather than grants. These countries need development finance, and that is the reality of the situation. If the IFIs do not make available low interest loans, and work with countries to make sure those loans are used well, then those countries will go to the market, will get high interest finance from less scrupulous lenders, and so we feel it is in the interests of those countries to do this.
There is an opportunity cost though to choosing loans over grants. We find this uncomfortable.
I don’t agree with the opportunity cost point. If we closed the loan window it would radically reduce the overall financing available from IDA to developing countries.
It seems disingenuous to claim that a move to loans has no impact. When countries lend to IDA, they do so with the understanding of repayment. This must be having some impact on the operations of IDA. If there was no difference between granting vs. lending to IDA one presumes that countries would not be looking for the lending option.
The deputies report for IDA 17 that sets this out. The other thing to say is that this could not have been done 20 or 30 years ago, the institution is now receiving repayments from loans issued to countries that have now graduated. The capital is therefore increasing and able to be used to issue more loans.
Where did this change of policy come from? Were borrower countries asking for this, or was it countries that pay into IDA?
It was agreed by countries from both sides of that spectrum and the consensus view was that it was a positive step for IDA.
There are obvious linkages between this policy decision and the work being done on debt sustainability. There is a push within the Bank for greater numbers of PPPs. This encourages countries to take expenditures off balance sheet and therefore they are not accounted for in debt sustainability figures.
From a water sustainability point of view, how is water and sanitation featuring in the discussions around the key themes for IDA18. In Maputo this year, I could see the important role of IDA in supporting this sector. Is it featured in the discussions?
It is not a theme, because there can only be four, but water and sanitation must be reflected in all the theme papers. It is an important consideration for the UK, our own water and sanitation team works very closely with the Bank.
Aid effectiveness is one of the key areas in which we work, there is a review on aid effectiveness at the end of the year. Is this something that UK prioritises?
- Yes, a priority for the UK, but I do not have any details.
- It would be appreciated if you let us know if you are picking up anything on your networks about how the other contributors are thinking about their IDA contribution. The UK has not decided the on its contribution. In most years the deputies report is usually agreed at October, but this year we are expecting it to take a little longer, and then we will review the package and where we have gotten to.
What are the deadlines for the final agreements, e.g. contributions and size/ framework of the new private sector window?
A good month before the final meeting on 12 December in Indonesia. It sounds like a lot of things are open but there was a lot of progress in the Burma meetings about this. People wanted more detail but there was good consensus. The private sector window amount has been agreed at $ 2.5 billion.