IFI governance


World Bank operations in China, Pakistan examined

15 December 1999

In November the Bretton Woods Project filed a submission to the International Development Committee inquiry into British aid to China and Pakistan. It suggested that the Committee examine the World Bank’s operations in these countries – especially as China has been the World Bank’s biggest borrower throughout the 1990s, lending US$2.1 billion in 1998/9.

For Pakistan it also suggested that MPs look into the Hub power project, set up with World Bank advice and financing. Once promoted as a flagship example of the World Bank’s ability to “catalyse” private sector investment in infrastructure, it has been bogged down for over two years in negotiations about the high cost of the power it produces. The project was subject of a detailed article in the Financial Times on 12th November, which alleged World Bank cooperation with an apparently politically-motivated inquiry by the former government of Pakistan into corruption around the project.

The Bretton Woods Project also sent a paper by Gabriel Lafitte, of the Melbourne Institute of Asian Languages and Societies, Australia. This examines the World Bank’s operations in China, and describes 10 projects in detail. Commenting on a rare interview by the head of the Bank’s office in Beijing, Lafitte states:

“the Bank has no proposals for the state to redistribute wealth, still less any intention of imposing conditionality on its loans in order to push the Chinese state to effect such redistribution. Rather than redistributing wealth from rich to poor, both the Bank and the Chinese government are trying to recentralize fiscal power, raise taxes and thus find sufficient money to recapitalize the failing state owned banks. This is likely to result in a massive transfer of wealth from poor to rich”.

The report also raises concerns about

likely unemployment rates, and state-owned enterprises abandoning their responsibility for health and education services provision, with little prospect of state or private alternatives being provided.

The Tibet Information Network made a separate submission on the Bank’s China Western Poverty Project (see Bretton Woods Update 14), which is currently being investigated by the World Bank’s Inspection Panel.

Gabriel Lafitte will give a public talk in London at 5PM on Tuesday 1 February at SOAS, Thornaugh Street, Russell Square, London. More details and his draft paper available from the Bretton Woods Project.