IFI governance

Background

What does real accountability mean in practice?

11 April 2014

Presentations

Dr Juan Almendares, Madre Tierra

  • We must compare reason and reality; reason might be investment and business, but the reality is what happens to the people
  • There is serious militarisation in Honduras, in reduces the ability to talk or communicate about this situation
  • There is serious poverty and suffering, especially in Aguan,; activists are persecuted and oppressed

Kate Geary, Oxfam

  • IFC has supported Dinant in two ways – directly and through FICOHSA
  • IFC is eager to look forward and find solutions, but we need to do this in historical perspective if we are to ensure accountability
  • A loan was made without attention to the context
    • Staff probably knew these things, but didn’t want to make waves, the CAO found systemic waves
    • The IFC response was appalling, and it was signed off by President Kim, despite the letters to him asking for him to take it very seriously
    • It took the board to step in and make IFC acknowledge mistakes and remedy the situation
    • This week the IFC issued an extraordinary admission of fault, we welcome this and the positive steps such as producing a lessons learned document
    • These are not new issues, the issues are basic and well understood; these are not just some “trade-offs”; the IFC has a long way to go to build trust

Bharat Patel, MASS

  • Tata Mundra is the biggest power project in Indian SEZs in the biggest district in the country, but it is in a very rich ecology of marine life and mangroves;
  • The fisherfolk engage in a traditional way of fishing (foot fishing). The fisherpeople are migratory – live at the shoreline for 8-9 months of the year; with very large productivity but in a sustainable way
  • $4 billion project with financing from many IFI
  • No proper due diligence on social impact, but IFC approved it anyway;  no effective compensation for fisherfolk; the complaint went to CAO in 2011, especially about the impact on marine ecology  from effluent and port to bring in coal; water temperature increase has stopped foot fishing; there is also a decline in lobster due to mangrove
  • No employment for locals, and fly ash is causing negative impacts on communities; there is also increased alcoholism and increased domestic violence;
  • No cumulative impact study on the projects in the area; there have also been health impacts including respiratory ailments in children and elderly
  • IFC is resolute in not accepting it is making a mistake on the ground; and we had scepticism in approaching the CAO, but approaching the CAO paid off
  • National Institute of Oceanography is supposed to conduct a survey, but it hasn’t been done yet

Jelson Garcia, BIC

  • Important to know the chronology of the events – it took 7 years of demanding accountability until now, community organisations are important, it takes time and energy,
  • There are structural flaws in how IFC management deals with accountability issues
    • CAO is very useful, and can reinforce the stances of the community
    • But a strong audit report does not guarantee doing the right thing
    • Members of the board not unified, and don’t compel management to do the right thing
    • Counting on sympathetic board members and access to international NGOs is not a good strategy
    • Three things needed: systemic weakness of board intervention, leadership/management ethics, quality of response instead of PR
      • Board should get access to CAO audit and management response before the president signs it off
      • Any further disbursement on investments at CAO should require board review
      • Action plan needed on every management response to an audit – including with an exit option and budget for working on this
      • Leadership selection should require a history of accountability check
      • IFI jointly financed projects – the IFIs should convene together and have joint  compliance work

Discussion

Q: Is a good social assessment at the project ID phase enough to solve the problems? Accountability needs to have some meat, I am not sure the board should design an action plan with management – the board should demand action, and have authority to question things later?

Juan – we are talking post-facto, but we need political/historical analysis; need to know the historical context of poverty; policy has to change because the project increases poverty and structural violence; need research that includes people’s participation

Jelson – I disagree, this is not micromanagement with the board weighing in, when management is recalcitrant, we need other means

Sas – it shouldn’t be up to the board to get this right?

Q: social assessment need not be complicated, just read the newspaper! This was negligence and institutional culture with perverse incentives. Role of the board – the board is a problem itself, EDs take instruction, defend national interest, and sometimes are not very sharp.

Q: I was an ED at IDB, and we started palm oil in Honduras, we need to get at the truth. We must improve the human and sustainable development of Honduras. Dinant and FIs in Honduras are making a social and economic contribution to Honduras. But we need to respect human dignity and ask for justice.

Juan: there are different ways of searching for the truth, I don’t believe in coups, I believe in the truths of people, people are being oppressed; truth should be consist with the ethics

Meg Taylor: Compliance function is increasing and will important; the board has different interests too; I am not sure compliance can always deliver for communities; there is a difference between executive board and full board – there is a question of politics

Kate: what does the IFC think? Personally I am not sure the IFC takes accountability seriously until there is a monetary cost associated with it

Mark, IFC: I’ve been at IFC for 20+ years and had a long history, critiques are sometimes over the top and overly harsh, we have evolved massively and we keep raising our standards; our mandate is to promote private sector development; we have admitted mistakes before, remember the management and board constantly change; don’t assume we are evil

Juan: appreciate the international solidarity with Honduran people, we need to keep discussing the human rights in Honduras, and the key thing is the needs of Garufuna and campesinos

Bharat – I have a ray of hope and I feel it will be better in Mundra

 

 

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