Commentators from across the political spectrum in Dubai agreed on the surreal nature of the proceedings. The Financial Times noted that, but for the “Arab robes and headdress”, the “blandness of air-conditioned international chic” could have been in Brussels or Chicago. The few civil society representatives who made the trip to Dubai were not impressed with what they found behind the veneer of modernity. Peter Bosshard, of International Rivers Network, discovered that migrant workers from south and south-east asia employed in the international convention center are paid less than $150 per month for a 6 day week of 12 hour days with only a half hour lunch break. There are, of course, no trade unions. Combined with its reputation as a tax haven and and its lack of fundamental rights and freedoms, Ann Pettifor of Jubilee Research was left wondering “what message Mssrs. Koehler and Wolfensohn were sending to the rest of the world by holding the conference there?”
This short round-up sets out some of the significant events and decisions in Dubai.
Iraq reconstruction and economic policies
The timeframe for lending by the Bank and the IMF to Iraq is still a matter for debate. In various statements the Bank has indicated that it was not willing to be caught in crossfire between influential countries and that it would not lend to Iraq without being given clear indications by its Board that they recognise the current authorities as a legitimate government.
The Bank has a policy which states a certain time should be allowed to pass before the Bank can engage in new operations in conflict-affected countries. This time is to weigh legal or political risks, whether the government is in control of the country, and by how many countries it has been recognised. As Joseph Saba, the Bank’s Country director for Iraq, recently put it “our question is who can sign for Iraq in borrowing money”. IMF Managing Director Horst Koehler urged “leaders of the world to set aside their disputes over Iraq and form a consensus so that the international community can really unite and the World Bank and the IMF and others can go to Iraq and work together with the Iraqi people”.
Members of the US-appointed Iraqi Governing Council and the US-led Coalition Provisional Authority were in Dubai. The new Iraqi Finance minister announced a series of reforms deemed by Alan Beattie in the Financial Times as “free-market economics so sweeping it suggested a bust of Milton Friedman might be erected in Baghdad to fill the empty plinth where the statue of Saddam Hussein once stood”. The order signed by Paul Bremer is said to abolish nearly all curbs on foreign direct investment (except in natural resources), allow foreign domination of the banking sector, and include cuts in income and corporate taxes and most tariffs. Other members of the Iraqi governing council criticized the measures.
The World Bank refused to give precise estimates of Iraq’s reconstruction costs but gave hints its own figures might be close to US estimates of nearly $70 billion. It expects to conclude a needs assessment and sectoral studies by the time of a major donor meeting in Madrid (23-24 October). The Bank has already suggested assistance could be channeled through a joint trust fund (as in the case of the Afghanistan Trust Fund, which it administers).
Relatedly the IMF sparked controversy when it presented a report on the economic situation in the occupied territories. While underlining resilience of the economic performance in the West Bank and Gaza in the face of conflict, the report says nearly $900 million in excise tax revenue were diverted outside of the Ministry of Finance between 1995 and 2000, out of which $500 million went to a special account controlled by President Arafat. Hanan Ashwari, a Palestinian lawmaker and onetime Arafat spokeswoman, acknowledged there had been incidents of misuse of funds in the past but that the release of the information was an attempt to discredit the Palestinian leader. “There is nothing innocent about the timing,” she was quoted as saying. “This is a campaign against the president and the (Palestinian) Authority.”
The IMF in low-income countries
One of the issues on the agenda for the International Monetary and Financial Committee was the role of the IMF in low-income countries (LIC). The IMF has issued various papers for discussion, including one which says the Fund’s policy advice to LICs needs to adapt to general improvements in their macroeconomic policies in recent years. Fund assistance should be provided on a temporary basis and would benefit from greater selectivity as some countries lack capacity and commitment to reform. IMF instruments should evolve to help countries in transition from conflict, encourage ‘graduation’ from IMF lending to private flows and help countries to face external shocks. Overall recommendations for IMF involvement in low-income countries include the need for the IMF to remain involved in LIC and to align its assistance behind country driven poverty reduction strategies (both recommendations echoed in the IMFC communique), the need to focus on the Fund’s core area of competence, to encourage exit strategies or ‘graduation’ from use of IMF resources, and to look also at industrial countries’ policies (such as agricultural subsidies) and their impact on LIC. The Fund’s Executive Board approved most of the recommendations last month. The IMF is now planning outreach to discuss the paper, which should include meetings in Europe and elsewhere in coming months.
Labour standards, the IFC and Haiti free trade zone
Peter Woicke, the head of the World Bank’s private sector lending arm, the International Finance Corporation (IFC), told trade union representatives at a meeting in Dubai that the IFC would adopt all of the core labour standards as standard conditions for all IFC loans. This new approach would be introduced in the next six months. The IFC will condsider a loan to a private company as part of the development of a free trade zone in Haiti before then. Given the strong risk of violation of labour standards in the project, trade union representative Peter Bakvis demanded that the IFC should make core labour standards part of that loan contract, even if core labour standards are not yet included in the safeguard policy. Woicke promised to consider that with his staff.
World Development Report on Services
The Bank released its flagship annual publication, the World Development Report 2004: Making Services Work for Poor People. Despite the dilution of the pro-privatisation rhetoric of earlier drafts, Rick Rowden of ActionAid argues that the report “neglects the risks to public health posed by the entry of foreign corporations” and “ignores the impact of deregulatory rules” such as the General Agreement on Trade in Services. During the press conference launching the report departing Chief Economist Nick Stern urged caution about private sector participation in water, referring to issues such as capacity and regulation and drawing a comparison with the privatisation of rail transport in the UK.
The International Monetary and Finance Committee
The Committee took few if any important decisions. Its communique mentions again the need for HIPC debt top-ups, (urging bilateral donors to cancel 100 per cent of debts owed to them), and the need to strengthen surveillance and crisis prevention through greater candour and transparency of IMF work and member countries. Other issues mentioned include Iraq and anti-terrorism finance work. Its next meeting will be on 24 April 2004 in Washington DC.
The Development Committee
The Development Committee – the ministerial body which oversees World Bank strategy – met on 22 September. It considered issues including World Bank governance, supporting country efforts to meet the Millennium Development Goals, debt, PRSPs, trade and infrastructure. Few major decisions were taken on substantive issues, but Trevor Manuel, South African finance minister, was granted an extra two year term as chair of the committee. Its next meeting will be on 25 April 2004 in Washington DC. The below gives an indication of the major issues discussed and the conclusions.
World Bank, IMF governance
The Development Committee statement was very weak. It urged the Bank and Fund to step up efforts towards greater transparency, decentralization and staff diversity and made a vague promise that developing country governments would be more closely involved in the Mid Term Review of IDA, starting this November, and in the IDA-14 negotiations next year.
The Committee welcomed the Analytical Trust Fund which aims to support Executive Directors representing sub-Saharan African countries to undertake independent research and analysis on development issues. This is to be financed by bilateral donors including the UK. The Committee called for further work on additional capacity-enhancing measures. The G24 grouping of Southern government ministers – many of whom are not able to sit on the Development Committee – said “the recent administrative measures to strengthen the capacity of sub-Saharan African chairs in the Boards of the IMF and World Bank […] cannot substitute for an increase in developing countries’ voting power”. This, they argued, was essential “to enhance the legitimacy of the IMF and the WorldBank”.
The Bank will have to report back to the Development Committee on all aspects of the voice issue at the 2004 Annual Meeting and a roadmap on procedures and next steps will be considered at the Spring meeting.
Millennium Development Goals (MDGs)
The Committee reviewed the Bank’s paper on implementing the MDGs and looked forward to the progress report that the Bank is due to provide by the Spring Meetings next April. It did not address the needless duplication and turf wars on producing such reports which have been flagged by a number of officials and NGOs.
Ministers asked the Bank, with the Fund, to do more work on “the merits of various policy options, such as an international financing facility, to mobilize the substantial additional resources needed”. Interpretations varied on what this meant for the UK-backed proposal, as the US seem to favour their own Millenium Challenge Account approach. Ministers also indicated that developing and emerging market countries should be consulted closely and that the Bank should report on this at its next Spring meeting. At that time the Bank will also have to provide a report on the Education Fast Track Initiative.
The Committee supported the Bank Group’s renewed focus on infrastructure and its follow-up to the recommendations of the World Panel on Financing Water Infrastructure. Implementation progress update will also be provided to Bank Executive Directors before the next meeting.
No significant progress was made and the language on key points of interest to NGO campaigners and indebted countries was very weak. For example ministers only “noted on-going discussions” about the methodology for providing additional relief at the HIPC completion point and “requested further work” on the topping-up methodology. However, ministers indicated that “in appropriate country circumstances, especially in view of long-term debt sustainability, more of it should be provided in grants and, where conditions warrant, in ways that can finance recurrent costs.”
The Bank/Fund Spring 2004 Development Committee meeting will examine a report being prepared by the staff of the Bank and Fund on a forward-looking framework for debt sustainability in low-income countries. The Committee also vaguely encouraged the Bank and the Fund to do further work on ways to help reduce the vulnerability of these countries to shocks, including commodity price and weather-related shocks.
Some ministers noted the disquieting trend of negative net flows from the World Bank in the past two years and urged the Bank to aid the least-developed countries through net positive financial flows. Some suggested increasing the use of grants, particularly in education and health.
The Committee welcomed the paper produced by the Bank and Fund on PRSPs and agreed that: “PRSPs are charged with multiple and sometimes competing objectives and the challenge now is to achieve successful implementation.” Among other ways forward, the Committee emphasized donor alignment and harmonization around national strategies and asked the Bank and the Fund to respond to requests for assistance from countries undertaking Poverty and Social Impact Analyses and developing alternative scenarios to meet the MDGs.
Some ministers noted, however, that the PRSP process has become unwieldy, slow to adjust to shocks that invalidate projections in the strategy, and too distant from expenditure decision and budgetary processes.
In his speech the Bank president James Wolfensohn said the recent World Trade Organization meeting in Cancun had been a wake-up call because poor nations-representing more than 3 billion people-had refused to accept the trade proposals put forward by the rich countries. “They signaled that there must be greater balance between the rich and the powerful, and the poor and the numerous. They signaled that for there to be global development and peace on our planet, there must be a different set of priorities”, he commented.
The Development Committee statement welcomed “the Bank and Fund’s recent pledge to support countries to benefit fully from a more liberalized trading system” and urged “continued efforts to tailor Bank lending activities to support country-owned trade initiatives, translating analysis and diagnostics into meaningful operations”. Ministers broadly agreed that the Bank’s focus for the next three years should be on supporting improved coherence between development and trade policies of developed countries; supporting trade policies in developing countries that take advantage of trade to drive productivity growth and poverty reduction; and undertaking analyses and consultations that facilitate a successful pro-poor outcome of global trade negotiations.