Lots of rhetoric, few specifics: DFID defends its policy on the World Bank

22 May 2008

The UK’s Department for International Development (DFID) has sheepishly defended itself in its government response to the International Development Committee’s (IDC) report DFID and the World Bank. DFID’s response, published 19 May provides a largely unremarkable and at times evasive reply to some of the more damning critiques contained in the committee’s report in March (see Parliamentary committee scolds DFID for its World Bank infatuation). In this, the IDC reprimanded DFID for its decision to hand over a fifty per cent increase in funding for the World Bank without sufficient analysis of whether or not this is good value for money. It also provided sharp analysis of the Bank’s failure to use impact assessments; its continued use of conditionality; and the British government’s lacklustre efforts to bring democracy to the Bank.

As part of its response DFID asserted that the World Bank is “a highly effective development organisation”, made several satisfied references to the Prime Minister’s speech in India in January on the World Bank, and pointed out that the upcoming appointment of a full-time UK executive director to the World Bank (timing as yet unconfirmed) will give DFID “greater capacity to pursue our objectives effectively”. It also distorted the IDC’s support for the UK’s increased contribution to the International Development Association (IDA), by failing to fully acknowledge the criticism that it did this with “insufficient rigour”.

In response to concerns over World Bank organisational effectiveness, and the caution levelled at the Secretary of State and his team “against making bold statements that the World Bank is the most effective multilateral development institution without appropriate qualification”, DFID congratulated itself on agreeing a “series of measures designed to improve the Bank’s performance in helping countries achieve and monitor progress towards their development goals”, including decentralisation of Bank staff to the poorest countries and help to assist countries improve their statistics capacity.

Spuriously, DFID stated that the Bank has agreed that the IEG carry out a review of the Bank's use of conditionality

In defence of the lack of analysis over its decision to increase the UK’s contribution to IDA, DFID stated that for the first time it has published multilateral effectiveness summaries “to encourage the international community to take a more systematic look a the effectiveness of the multilateral”. It then provided a rather woolly explanation of its efforts to push for greater information on “IDA at work” prior to the IDA 16 discussions, referred to reports of the World Bank’s Independent Evaluation Group, and the Bank’s commitment to the Paris aid effectiveness agenda.

On calls for stronger, more consistent and transparent use of impact assessments, DFID conceded that the Bank can do more and that local capacity needs to be strengthened. It added “during the IDA 15 negotiations, the Bank agreed to a series of measures to improve its performance on impact assessment, including producing revised good practice note in 2008 and an independent review of its PSIA work”. Importantly, DFID asserted that it would consider the Bank’s performance on this when considering future funding.

With regards to concerns over conditionality, DFID proudly stated that “the UK has led the international debate on conditionality reform and helped secure real improvements in the Bank’s use of conditionality” and took much of the credit for the setting up and implementation of Good Practice Principles. DFID also claimed that commitments were made by the Bank during the IDA 15 negotiations to improve incentives for Bank staff to implement the GPPs, and to improve the use of PSIA. However a closer look at key IDA documents fails to substantiate this claim. Spuriously DFID stated that “the Bank has also agreed that the Independent Evaluation Group, which is independent of Bank management, should carry out a review of the Bank’s use of conditionality”. In fact, this review will focus on poverty reduction support credits, which are only a subset of the issue. Though the Bank is planning to carry out an internal evaluation of its development policy lending in 2009, this will lack the independence of an IEG report.

On concern expressed by the committee regarding the proliferation of trust funds, DFID remained disappointingly quiet, stating that it would “keep Parliament informed” on this via its Annual Report on DFID and the World Bank (see UK report on its activities at the World Bank: Weak, unaccountable, and late).

On knowledge bank, DFID failed to acknowledge or respond to the IDC’s assertion that DFID ensure that the World Bank’s role as a ‘knowledge bank’ is “demonstrably neutral and flexible, providing well-argued menus of best practice options for effective development”. Instead DFID committed to providing updates on Zoellick’s work on this matter as part of the World Bank’s six strategic themes.

In response to the IDC’s finding that the UK has failed to act on its statements on the issue of governance and accountability, DFID paid yet more lip service to the issue of adequate representation of developing nations in World Bank decision-making, citing the agreement made at this year’s World Bank spring meetings for “a package of measures to increase the say that developing countries have in the Bank” by 2009. DFID agreed “that the practice of selecting the heads of the World Bank and IMF on nationality should end”, though failed to say what it would do about it.

DFID endorsed the recommendation that it should encourage the Bank to “adopt outreach strategies with parliaments and civil society consistently across its programmes, especially with borrower countries”. However it stopped short of agreeing that it push for the Bank’s policy of refusing to appear formally before parliamentary bodies be discussed at the Board of Directors within six months and that DFID push for a change in the policy. DFID felt that it was unclear “that the benefits arising from more formal procedures would be sufficiently high to warrant the increased burden this would place on the Bank’s top management”. DFID said that it would “consider” any request from the Parliamentary Network of the World Bank to help fund a larger secretariat.

On the strong criticism of the UK’s failure to carry out high profile advocacy for World Bank reform in Washington, DFID evasively responded that it is “creating a new post in our Embassy” to further “strengthen our capacity in Washington on development issues”.

In relation to the World Bank as a “Bank for the environment”, DFID played up its role in the Environmental Transformation Fund International Window which will help to “catalyse” and “capitalise” the World Bank managed Strategic Climate Fund. It flatly disagreed with IDC’s concerns over the setting up of yet another trust fund and the recommendation that “DFID conduct an audit of the … funds available for international climate change work”. DFID failed to acknowledge the role of the UN framework convention on climate change, or the high-profile concerns on governance relating to this fund.

In response to questions regarding the World Bank’s skewed energy portfolio towards fossil fuel funding DFID fell back on the misleading World Bank figure that it increased its financing of “renewable energy and energy efficiency” by 45 per cent, failing to acknowledge that this percentage consists largely of carbon finance funds, a large hydroelectric dams and funding from the Global Environment Facility and that only about 6 per cent of the World Bank’s energy lending is for ‘new renewables’.