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New World Bank infrastructure strategy

Paving over development?

7 February 2012

A World Bank infrastructure strategy update, developed because of a G20 push for more infrastructure investment, reaffirms the Bank’s commitment to large-scale projects and scaled up private finance through public-private partnerships (PPPs, see Update 77), despite questions about bloated costs and development impact.

The updated strategy, Transformation through infrastructure: World Bank Group infrastructure strategy update, was leaked in November last year. The Bank strategy actually functions as an update to its previous infrastructure strategy, and this seems to have precluded any substantial consultation process (see Update 77). It outlines three main pillars of future Bank infrastructure investment. The first is to continue its more typical infrastructure projects, “while increasing effectiveness in the areas of poverty, governance, gender and knowledge.”

The second pillar is a new focus on large “transformational” projects that “maximise green, regional, and inclusive/broader development benefits”. These will also represent “points of leverage in the universe of potential infrastructure investments opportunities”, meaning projects that involve a greater diversity of financing sources such as donor governments, including  new middle-income donors, international mechanisms such as climate funds, and the private sector.

The third pillar aims to bring in “more private sector financing”. The International Finance Corporation (IFC), the Bank’s private sector arm, is creating a new global equity fund for infrastructure to “ramp up” business, while the Multilateral Investment Guarantee Agency (MIGA), the Bank’s political risk insurance agency, will “continue to scale-up its guarantee support to the infrastructure sector”. The Bank is also implementing an action plan to double private sector engagement in PPPs in infrastructure.

Familiar themes

These areas match the priorities of the G20 development working group, a body of officials preparing plans for G20 development ministers meetings (see Update 77). The final report of the G20-commissioned High Level Panel (HLP) on infrastructure also emphasises “transformational projects” and scaled-up PPPs. The G20-mandated Infrastructure action plan, produced by the Bank with input from other multilateral development banks (MDBs), lays out the role of MDBs in this process. The Bank’s strategy is firmly in line with these documents, outlining the role of Bank in the implementation of this agenda.

Both reports were made available after the G20 meeting in Cannes in November 2011. Infrastructure is one of the three top development priorities of the Mexican G20 Summit in June.

In a November analysis of the policy formation of the G20-MDB agenda, Nancy Alexander of the German political foundation Heinrich Boell notes that “the role of the HLP and the dominance of private financiers in its composition create the impression that, hand-in-hand with the MDBs, the G20 has created a mechanism to design and implement an infrastructure agenda with minimal involvement by the governments and stakeholders of affected low-income countries much less any democratic debate or processes.” She observes that “there has been a serious democratic deficit in the formulation of the G20 and MDB agenda. The Action Plan was a joint document by six MDBs, so it circumvents the individual MDB policies on consultation. Furthermore, the Bank’s new strategy demonstrates the profound impact of the G20 process on the MDBs, possibly leaving the 173 countries which are part of MDB governance, but not part of the G20, by the wayside.”

Transformation?

A November paper by UK NGO network Bond questions the developmental impact of the G20 agenda. It argues that “the focus is very much on infrastructure investment as key to economic growth rather than to poverty reduction.” It also says that “there is concern that the involvement of the private sector will divert both private and public spending from critical areas and may lack the appropriate safeguards surrounding the social and environmental impact on local communities.” The paper notes that an emphasis on PPPs implies a danger of the “the privatisation of financial gains”, while the Heinrich Boell report argues that “many low-income countries are not in a position to use scarce domestic resources to support the scale or nature of infrastructure investments envisioned by the G20.”

The Inga hydropower project in the Democratic Republic of Congo (see Update 70, 67) is touted by the HLP as one of 11 “exemplary transformational” projects. Peter Bosshard of NGO International Rivers notes that the first phases of Inga “have turned into an expensive white elephant that hardly provides any benefits to the poor. Even the rehabilitation that the World Bank is currently funding has turned into a bottomless pit of mismanagement. The future stages of the Inga scheme foresee the construction of hydropower dams … [whose] outputs are primarily destined to serve the needs of mining companies and urban centres in far away places such as South Africa, the Middle East, and Europe.” He argues that “if the new approach proposed by the World Bank and the G20 promotes transformation, it is the transformation of aid into corporate welfare.”

Srinivas Krishnaswamy of Indian NGO Vashudha Foundation also questioned how ‘transformative’ projects devised under the new strategy will be. “The pathways proposed by the Bank have no real plans to address poverty and the desperate need for energy access in low-income countries. Instead they are in favour of conventional energy infrastructure, which has not delivered energy access or alleviated poverty”.