+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Bretton Woods Bulletin An update of news and action on the World Bank and IMF February 2014 Published by BRETTON WOODS PROJECT Critical voices on the World Bank and IMF +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ 1. World Bank accountability mechanisms: Any lessons learned yet? 2. BRICS Bank: New bottle, how’s the wine? 3. IFC’s bitter tea: Investment in Assam receives global condemnation 4. The Troika “hellhound” bites back in Greece 5. IMF blames the victims as markets thow another taper tantrum 6. World Bank’s thirst for hydropower 7. World Bank and agriculture: Cultivating controversy? 8. World Bank’s Burma spending spree 9. World Bank’s mining treasure map 10.Shopping mall Shangri-La: IFC’s lending for luxury 11.IMF lending facilities to low-income countries 12.Malawi’s cash-gate scandal 13.Bank develops “citizen engagement” strategy 14.Program-for-Results review launched 15.Grenada: IMF admits failures 16.Lagarde – equality champion? 17.Complaint filed against IFC funded Lafarge mining operation 18.IFC funded Tata Mundra coal plant to be investigated by ADB 19.World Bank guarantees policy reform ===================================================================== IFI GOVERNANCE - Commentary 1. World Bank accountability mechanisms: Any lessons learned yet? --------------------------------------------------------------------- “Insanity is doing the same thing over and over again and expecting different results.” - Albert Einstein The World Bank Group accountability mechanisms – the Inspection Panel, which handles complaints for public-sector projects, and the Compliance Advisor Ombudsman (CAO), which handles private-sector projects – were created to provide communities a space to raise their concerns about projects and to ensure the accountability of Bank- supported programs. With the October 2013 adoption of its new strategy, the Bank decided that “smart risk-taking will help clients to strengthen their capacity”, which it interprets to mean that accountability mechanisms should “comple­ment compliance with a focus on outcomes”[1]. However the effectiveness of these mechanisms relies on the extent to which their recommendations and findings are taken into account by the management of the Bank and that actual remedies are provided to amend potential failures in the programmes. In three recent and fundamental cases, the Inspection Panel and the CAO concluded that Bank-supported programmes failed to comply with the Bank’s safeguards and policies. The institutions found that the Eskom energy project in South Africa, the Tata Mundra hydropower project in India, and the Dinant palm oil project in Honduras (see Observer Winter 2014, Bulletin Dec 2014, Update 81) posed serious negative impacts to the environment and human rights that according to the CAO, its compliance report on Dinant, resulted from the failure “to overlook, to articulate, or even conceal potential environmental, social and conflict risk” [2]. The World Bank Group president Jim Yong Kim has not made a serious response to these findings. This can be seen in his apparent unwillingness to provide effective and immediate solutions to the Bank’s internal structures, which are needed to improve environmental and social safeguards for Bank-funded projects and activities. The Bank president’s failure to consider the findings by the accountability mechanisms threatens the effectiveness of these institutions. This lack of commitment to learn from past mistakes undermines the value of the Bank’s own safeguards and the chance to improve the outcomes for those affected by Bank-funded activities. It sends a message that the Bank lacks a real commitment to collaborate and ensure accountability, and that it is not willing to assess potential errors in the approval and implementation of the programmes it supports. The future of the accountability mechanisms -------------------------------------------- Despite the inadequate reactions by the Bank’s management in formulating action plans that address the findings of the accountability mechanisms in these three cases, there are opportunities for re-evaluation and correction. There are good reasons why when either accountability mechanism identifies a programme or project that has violated the Bank’s policies and safeguards, the Bank is required to develop effective action plans that incorporate and address the conclusions from the accountability mechanisms. The action plans should consider learning lessons from the past and avoiding the repetition of the same mistakes. The Bank’s structure and decision-making processes are clearly complex and are not easy to change. Bank management should use the opportunity to assess internal decision-making processes and implement reforms in response. The Bank’s management also needs to seriously consider the findings of the mechanisms and implement the necessary measures to bring about changes in the performance of those specific projects. These measures must also be applicable to future programmes to prevent these situations from happening again in similar cases. This is a core value for the effectiveness of the accountability mechanisms, and the improvement of the Bank Group´s performance. Thus, the adoption of a different approach by the Bank to the one it used in the Dinant case in Honduras is vital.[3] The Bank has the opportunity to show different results to the accountability mechanism findings. There are two important on-going investigations – the Quellaveco mine in Peru (see Update 82) and the Angostura mining case in Colombia – that are pending the CAO´s final decisions. The allegations against the IFC for the above cases includes non-compliance with their policies, inadequate consideration of environmental impacts and promoting mining in sensitive ecosystems and in violation of national laws. We expect a different kind of response than to the three previous cases. Furthermore, the World Bank is going through a review of its environmental and social safeguards[4]. The plan is to adopt an integrated policy framework that combines and simplifies current safeguard policies to make them more flexible and focussed on results. This new policy framework could influence how other international organisations, such as the UN’s Green Climate Fund, approach environmental and human rights protection. The language from the World Bank’s strategy does not help. The review should not be only about ways to simplify the applicability of safeguards, but to ensure that the Bank learns from its mistakes and commits to comply with human rights laws throughout the life cycle of projects and programmes. The Bank’s president has made several public statements on his commitment to public health, fighting climate disruption and averting the dilution of safeguards. He has pledged that the World Bank will learn from its past mistakes. As a globally influential institution, meeting these commitments and creating a new and more effective safeguards framework will bring greater legitimacy. This needs to be coupled with strong, effective and independent accountability mechanisms which can play a crucial role in creating certainty for people affected by World Bank projects. The mechanisms must be powerful enough to influence the Bank and hold it to account. Footnotes --------- [1] New World Bank Group Strategy from October 2013. [2] CAO investigation p. 59. [3] In the Dinant case, the CAO found that due to internal pressures the discussion of the due diligence by the IFC was neglected and that the culture to risk aversion inside the IFC may have put pressure on staff to overlook environmental and social negative impacts. [4] http://consultations.worldbank.org/consultation/review-and-update- world-bank-safeguard-policies ===================================================================== FINANCE - Commentary 2. BRICS Bank: New bottle, how’s the wine? --------------------------------------------------------------------- Summary - Last year BRICS' leaders agreed to launch a BRICS development bank. Whether this is considered positive depends in part what questions are being asked. - Sameer Dossani of ActionAid International highlights the flaws in the World Bank and IMF, analyses whether a BRICS Bank could be different from these institutions and proposes what it should do and what it should look like. ------- At the 2012 Delhi summit of Brazil, Russia, India, China, South Africa (BRICS), the leaders of the five nations agreed to launch a BRICS development bank. The following year in Durban, the initiative was given a name – the New Development Bank (NDB). While perhaps not the most original of monikers, the name does beg questions – how new is the New Development Bank? Whose development are we talking about here? And does the world need another multilateral bank? We are still awaiting answers on these questions, and judging by the latest reports, so are the five BRICS countries. According to reports from the latest BRICS meetings, aside from the question of how much capital the NDB should have in its ‘vaults’ ($10 billion per country, $50 billion in total), there is little that the countries seem to agree on. While official information is hard to come by, rumours abound. Whether or not those rumours are considered positive developments depends in part what questions are being asked. If the questions are “Will there be adequate social and environmental protections?” or “Will the NDB actually finance alternative forms of development such as decentralised renewable energy production?” the conclusion is likely to be negative. But if the questions are “Does the world need a Southern-led and controlled financial institution?” or “Would NDB loans come with the kind of harmful macroeconomic conditions that the IMF pushes?”, the conclusion would be more positive. Do we need a new development bank? ----------------------------------- The World Bank and its sister institution the International Monetary Fund, established 70 years ago, have lent billions to developing countries. Yet in their heyday – in the 1980s and 1990s – these institutions did not produce results in terms of poverty reduction or even in terms of increasing economic growth. In almost all regions, inequality skyrocketed during this period. Even now, with the exception of Latin America, the gap between rich and poor continues to grow. While the World Bank would be quick to point out that it cannot be blamed for these failures, it is telling that institutions supposedly meant to foster development have to this day very few examples of countries that they have actually helped to develop. Part of the failure can be attributed to the triumph of ideology over evidence. “Washington consensus” policies – fiscal and trade liberalisation, privatisation and budget austerity – were required of every developing country that sought international assistance. The results have not been pretty. As has been extensively documented, the period from 1980-2010 was in part defined by extremely slow growth globally. Where growth did occur in the North, it often turned out to be the result of speculative bubbles. In the South, the only countries to grow were those that ignored Washington consensus policies – China, Malaysia, Singapore and a few others – and used state-backed borrowing and investment to drive an industrial policy. In the last decade or so, middle-income countries, including the BRICS, have been investing – and sometimes giving what we would usually call ‘aid’ – to less developed countries in Asia, Africa and Latin America. China is by far the biggest player here, but Brazil, India and others are also extending their reach. What does the increasing role of Southern countries as agents of ‘development’ in other Southern countries mean for the world’s poorest and most marginalised? Is this yet another layer of exploitation, or do these events possibly offer a way out of poverty to communities who have been denied their rights for centuries? Will the NDB help countries improve policies and practices or will it be a mechanism whereby rich countries like China gain access to more resources and markets using the fig leaf of multilateralism? There are no straightforward answers. But before we explore deeper, we should be clear about what is not on the table. Who’s development model? ------------------------ Progressives have long critiqued the development model of the North being exported to the South as environmentally and socially exploitative. The focus on GDP growth to the exclusion of other aims (externalities, in economic jargon) is highly problematic, especially in countries that do not yet have strong social and environmental regulations. In countries like India, social movements have strongly opposed a development model focussed on urbanisation, infrastructure development, and on expanding market reach, which almost necessarily entails the destruction of traditional and indigenous communities and lifestyles. Even in a best-case scenario, initiatives like the NDB are unlikely to challenge any of this – quite the opposite, they are likely to take a GDP-centred, Northern-development-model approach. That is the model that these countries are following, with megaprojects like the Three Gorges dam in China, Jirau dam in Brazil and Kudankulam nuclear power plant in India being showcased by their respective governments as development successes. But the NDB’s failure to challenge the lack of environmental and social protection in the development model does not mean that all hope is lost. While the neoliberalism of the 1980s and 90s promoted a worldview in which growth and a certain model of development are ends in themselves, it did not even deliver the growth and development that it promised. Amidst recent triumphalism about the achievement of the UN’s Millennium Development Goals sits a sad truth: progress against poverty has been made in only a handful of countries. Take out China, Brazil and a few others, and poverty reduction has a poor track record in the last 30 years. Even GDP growth has been disappointing at the global level (with a handful of exceptions), and a lot of the growth that has happened has been deeply inequitable – consider Mexico and India for some of the less equitable growth stories. The failure is not surprising. Neoliberals argue that countries should find their comparative advantage to create a trade-based strategy to growth – countries should export what they have. However, neoliberalism has never explained why the economies of the US and Japan are not dependent on the export of fur and fish, commodities that they were exporting when they began their development process. True proponents of development understand that industrial transformation, not comparative advantage, is the key to the story. Countries like the US and Japan were not developed as long as their economies were primarily exporting raw materials – only when the economies began to produce and export manufactured goods could they be called developed (or even developing). The process of industrial transformation is something that the World Bank and IMF have not supported – in fact the institutions have opposed and blocked these policies. What the BRICS Bank could do ----------------------------- Might a BRICS bank be different? It is certainly possible. Many of the BRICS countries (China being the most obvious example) are going through the process of industrial transformation themselves, with state support for domestic companies a key component of economic policy. And the BRICS countries (unlike the G7 countries who still dominate the World Bank and IMF) have no history of trying to force economic policy down others’ throats. To be clear, that does not mean that we can expect better results in terms of human rights or environmental protection. Early development in Great Britain, for example, was characterised by high levels of pollution and worker exploitation at every level. But it was a development process (albeit an awful one) that centred around the transformation from an agrarian economy to an economy that manufactured goods. The NDB, if consistent with BRICS rhetoric so far, should not hinder (and might even support) this process of industrial transformation. Many NGOs critical of proposals for a BRICS Bank have pointed to the decades of struggles to force the World Bank and other international financial institutions to adopt and enforce policies to protect vulnerable communities and the environment. They point to controversial projects like the Brazilian-Japanese-Mozambique ProSavana project, which involves state-owned Brazilian Agricultural Research Corporation adapting Brazilian export crops for Brazilian agribusinesses to start large-scale agriculture projects in northern Mozambique, with export infrastructure paid for by the Japanese aid agency. The critics say it puts Mozambiquan small farmers at risk while benefiting Brazilian and Japanese multinational companies in their production and processing of soy, maize, sugar cane and other cash crops. These criticisms are certainly valid; problems related to bilateral financing of projects are likely to reappear in these multilateral efforts. But it is unlikely that a development bank can be founded in 2015 and not have some kind of social and environmental protections in place. What those protections will look like and how they will be enforced are questions with which NGOs and other stakeholders should be engaged. Unfortunately, it is not clear how NGOs or other civil society actors are meant to engage with this process. Unlike other developing country formations (notably IBSA – the grouping that includes BRICS countries India, Brazil and South Africa), there is no formal mechanism for civil society consultation or engagement. Even if this does not change for the BRICS, CSOs should be pushing hard to include CSO consultations on the policies and programmes of the NDB. Despite its many potential flaws, the proposal to establish the NDB should be viewed with cautious optimism. The key countries driving the process – Brazil, India and China – are not motivated only by a desire to expand their political and economic influence. They are already doing that without an international development bank. They are also motivated by a desire for legitimacy coupled with a desire to compete with (perhaps even show up) the G8 countries that did not live up to promises made in 2008 and 2009 to give developing countries more say over the IMF, World Bank and other IFIs. At that time, the BRICS countries and others were promised more say over the IFIs in exchange for putting in billions which the IMF ultimately directed to Europe. The rich countries have yet to live up to their end of the bargain. The BRICS’ desire to be seen as the promoters of ‘genuine’ development gives campaigners an inroad to help the BRICS countries define what genuine development is. If the development discourse were to focus less on mosquito nets and vitamins (important as those may be) and more on sustainable economic transformation, industrialisation and job creation, we might all be better off. Both the BRICS and CSOs can be part of the process. A bank that is willing to fund policies aimed at economic transformation would be a step in the right direction. But would it really contribute to development and poverty reduction? There are a few things to look out for on the off chance that it can meet this lofty goal. First, the NDB should lend not just to BRICS countries (who have many other potential sources of income), but also the world’s poorest countries. Secondly, the NDB should not focus on a specific sector, but rather it should fund those projects that countries identify as key to their industrialisation and development policies. If that is not feasible – we are already hearing that there will be sectoral focus on infrastructure – it should only operate in countries where investment in the niche sector is already part of the national development strategy. Thirdly, in addition to financing projects, the NDB should be building up technical expertise, research and documenting various development experiences. Despite the noble efforts of some, such as Cambridge economist Ha Joon Chang, there still is not enough documentation on why and how countries develop. There is even less documentation putting that theory into practice in the context of a particular developing country, and where that documentation exists it is usually coloured by the political agendas of the World Bank and the IMF. The NDB should build up a counterweight to those narratives and work with underdeveloped countries who may request help to develop their own strategies of economic transformation. A new global architecture -------------------------- If the NDB is really trying to push in a different direction, it should be cautious about working with the existing IFIs, especially the World Bank and the IMF. While those institutions are already preparing to greet the NDB as a potential partner, partnership would come with a lot of baggage for an institution promoting itself as an alternative. In order to create such a genuine alternative, it should look elsewhere, perhaps to more participatory institutions like the Global Fund for AIDS, TB and Malaria. In addition to a more democratic governance structure – we are hearing rumours that each of the BRICS countries will contribute an equal share of money to the NDB pot, meaning that they would all have the same number of votes on its board – the NDB should ensure that representatives from recipient countries are also part of the process. There are many ways in which it could do so – the best might be to create a governance mechanism that includes representatives from other structures such as the African Union or the LDCs block as well as members of Southern civil society. If the NDB can establish governance structures more equitable, more transparent, and more tilted towards ensuring that the needs of poor countries are at the fore, it may add to the already building pressure for meaningful reform of the Bretton Woods institutions. Sameer Dossani, ActionAid International’s international advocacy coordinator, has been working on issues of debt, development, human rights and international economic justice issues for over a decade, including as director of NGO Forum on the Asian Development Bank and 50 Years Is Enough: U.S. Network for Global Economic Justice. ===================================================================== RIGHTS - Analysis 3. IFC’s bitter tea: Investment in Assam receives global condemnation --------------------------------------------------------------------- In February 2013, three grassroots organisations: Promotion and Advancement of Justice, Harmony and Rights of Adivasis (PAJHRA), People’s Action for Development and the Diocesan Board of Social Services filed a complaint on behalf of tea plantation workers in Assam to the World Bank’s accountability mechanism, the Compliance Advisor Ombudsman (CAO), alleging numerous violations of human and labour rights on three tea plantations owned by Amalgamated Plantations Private Limited (APPL). Assam, a state in northeast India, is the source of more than half of India’s and one sixth of the world’s tea. Such large-scale production and profit rely on thousands of workers belonging to adivasi (indigenous) communities, forcibly brought to Assam’s tea plantations from central India 150 years ago. Today their living and working conditions remain shockingly poor, with the plantations lacking adequate essential services, such as healthcare, education, and food, and workers paid only rupees 90 ($1.5) per day, far below the state’s minimum wage of rupees 169. In 2009, the International Finance Corporation (IFC), the private sector arm of the World Bank, invested $7.87 million in APPL, nearly a 20 per cent stake. Just under 50 per cent of APPL shares are owned by Tata Global Beverages, owners of the Tetley tea brand. The complaint details numerous violations of the IFC performance standards, international and national law, including excessively long working hours, inadequate compensation, poor sanitation and related health conditions, degrading treatment and abuse by management, and restricted freedom of association. CAO investigation ------------------- The CAO compliance team is currently investigating the allegations, following a failed attempt to start a dialogue between plantation workers, their representative organisations and APPL. The company’s management refused to recognise the grassroots organisations, composed of people from tea plantations and who have family working on plantations, as legitimate worker representatives to participate in a dialogue process. Simultaneously, APPL was using retaliatory strategies (abruptly assigning workers to unfamiliar jobs, substantially increasing their working quota and even intimating that the complaints might lead to job losses) against workers participating in the CAO process. The CAO was unable to address the rigid power dynamics that shape the exploitative relationship between management and workers, and the resulting intimidation and retaliation, leading to a compliance audit. “We knew that an audit was coming when the management would tell us to dress and behave well and would give us protective gear, which we would have to return back at the end of the day”, said a worker in one of the APPL plantations referenced by the complaint. “For years we have been demanding clean water, latrines and decent health care, yet we have never spoken to any audit team and no one has ever asked us about our work and living conditions. We expect this audit to be different, and our complaints to be actually heard”. The CAO will now investigate whether the IFC met its due diligence requirements prior to investing in APPL, and whether it fulfilled its role as supervisor in addressing the ongoing violations. As extensive evidence shows, including a recent mid February report by Columbia Law School Human Rights Institute (CLSHRI) and a letter submitted by the complainants and civil society groups to the CAO documenting violations of state, national, and international law, the IFC failed on both accounts. Well documented historical and current violations of fundamental and labour rights are evident from the rampant malnutrition, illiteracy and maternal mortality present on all of Assam’s tea plantations, including those owned by APPL. Furthermore, workers are forced to join a union that does not represent their interests, and maintains poverty levels on the plantations through collusive agreements with tea producers. Even after its investment was approved, the IFC turned a blind eye to egregious incidents on APPL plantations, such as the collapse in 2009 of an eight-month pregnant worker while she was plucking tea and the death in 2010 of a worker allegedly due to exposure to pesticide. According to the CLSHRI report, labourers’ unrest which followed the incidents led to the death of two other workers and criminal charges filed against some of the protesters. The IFC took no public action to address these incidents, despite a 2010 US Consulate investigation finding detailed in the CLSHRI report that APPL was “very controversial from a labour/legal/human rights perspective,” and a report of the International Union of Foodworkers on these incidents leading the CAO vice president to initiate a compliance audit in 2012. The audit remains open at the compliance stage. Instead, the IFC’s due diligence relied heavily on Tata’s reputation as a global “leader in progressive environmental, social responsibility and occupational health and safety initiatives” (from its 2006 environmental and social review of Tata) and on the company’s certifications from private entities, such as international NGO Social Accountability International’s SA8000, a voluntary standard for workplaces, and the Ethical Tea Partnership, a UK-based NGO, which establishes various labour and social standards for companies globally. Not only did the IFC fail to inquire into APPL’s inhumane working conditions, but it also paid no attention to how these certifications were obtained. Firstly, private certification programmes use self-assessments and auditing companies with varying standards for approval. Secondly, Tata Global Beverages is closely associated with the founding of the Ethical Tea Partnership and in the governance of Social Accountability International. The IFC should have been aware of the structural injustices in Assam’s tea industry, and must now act responsibly to address these deep-rooted problems. The IFC must work with APPL to find ways to improve access to basic services, such as clean water, healthcare and education, on the plantations. The IFC must also address the historical and ongoing exploitation of workers, in part by facilitating workers’ right to freely associate and form unions that will truly advocate for their interests. APPL and the IFC’s uneasy reactions to the tea workers’ complaint, ranging from an outright denial of the allegations advanced by complainants to retaliation against workers and defensive media strategies, show that workers’ voices are finally being heard. While the results of the CAO process are yet to be seen, it has caused the first cracks in the entrenched inhumanity of Assam’s tea industry. It is hoped that the CAO investigation will take place within the next three months - the date is still to be confirmed. Stephen Ekka, director of PAJHRA, one of the grassroots organisations involved in filing the complaint, commented: “We invite the investigation team to see with their own eyes that nothing has changed on the plantations since the World Bank got involved. The supposedly ethical and sustainable Tata company continues to make large profits from the mistreatment and exploitation of plantation workers. This cannot continue.” ===================================================================== CONDITIONALITY - News 4. The Troika “hellhound” bites back in Greece --------------------------------------------------------------------- Summary - Lagarde concedes “wrong approach” in Greece but claims “safety net” meant “people would not suffer too much” - 800,000 Greeks lack health coverage, spikes in suicide, poor nutrition, increased infant mortality and HIV infection - Troika, France, Germany begin secret negotiations over need for new Greek loan, Greek minister not invited - Troika accused of violating “every act” of the EU charter of fundamental rights - EU parliamentary committee brands IMF “opaque”, “inflexible”; lacking legal basis - Trade unions attack Troika’s “anti-labour measures” ------- In late February the IMF, along with its Troika lending partners (the European Central Bank and European Commission), is conducting a delayed review of its lending to Greece. Though the Greek government is trumpeting its apparent success in delivering a primary surplus by drastically cutting expenditure, the economic, social and health consequences for Greek people continue to deteriorate and Greece may in fact require yet another loan (see Update 71, 83). In an interview with Australian broadcaster ABC, coinciding with her attendance at the mid-February summit of G20 finance ministers, IMF managing director Christine Lagarde acknowledged that the Greek lending programme suffered from “miscalculations”, which were “the ones that led to … the wrong approach to the financial situation”. Lagarde added “we have done everything we could to make sure that the burden would be fairly borne by all and not just by the employees and the civil servants, we have made sure there was enough of a safety net so that people who were most exposed would not suffer too much” The extent of Greek suffering was revealedby a February paper in the academic journal The Lancet. Titled Greece’s health crisis: from austerity to denialism, the paper found that 800,000 Greeks (or 7 per cent of the total population) now lack health coverage. The study also revealed large increases in rates of suicide, infant mortality, child abandonment, HIV infection and poor nutrition. Due to conditions stipulated in the Greek loan agreement with the Troika, the government has cut public spending for health to lower than any other country that joined the EU before 2004. In 2012, the government actually cut more than the Troika had demanded in hospital costs and pharmaceutical spending to meet its overall fiscal commitments. The Lancet study reported that in Achaia province 70 per cent of respondents had insufficient income to purchase medicines prescribed by their doctors. The authors argued that official “denialism” has refused to recognise the “harmful effects of austerity on health” adding that “the failure of public recognition of the issue by successive Greek governments and international agencies is remarkable.” In January a letter signed by 19 trade unions, human rights group and civil society organisations was delivered to Martin Schulz, president of the European Parliament, asking that he commission a report on the situation of human rights and democracy in Greece. They wrote in reference to the Charter of Fundamental Rights of the EU that “it is hard to find a single article that has not been violated by the Greek government during the last three years as part of the policies it has implemented against its own people.” A February report by news agency Inter Press Service also revealed that a fact-finding mission by the International Federation for Human Rights had visited Greece that month to examine “evidence that the austerity measures and structural reforms which the government has had to implement … [threatened] civil and political rights”. Following a late February speech at Stanford University, Lagarde was asked by Nathalie Bridgeman Fields of US NGO Accountability Counsel why the IMF is the only major international financial institution lacking an accountability mechanism to enable people affected by its work to lodge a grievance. Lagarde responded that “I dissent”, and referred instead to the IMF’s own board of 24 executive directors (appointed by member states directly or via constituencies) as the group to whom the Fund is accountable. Civil society organisations have long called for an ombudsman to be appointed to enable those impacted by the IMF to file complaints that would be investigated independently. Possible new Greek loan risks political fallout ----------------------------------------------- Widespread media reports have indicated that the Troika lenders are discussing the potential need for yet another Greek loan package. According to newspaper the Wall Street Journal, during January’s EU finance ministers’ summit there was a secretive meeting of the Troika members and the German and French finance ministers to begin negotiations over the likelihood of a new loan to Greece. The article claimed that Yiannis Stournaras, Greece’s finance minister, “was not invited”. Dutch finance minister Jeroen Dijsselbloem later claimed that talks on additional funding will not be held until after the summer, allaying fears of a new political crisis if Greece required additional funding prior to European elections in May. According to newspaper The Greek Reporter, in early February “Troika officials have estimated that Greece’s fiscal deficit for the years 2014 and 2015 will reach the amount of €8 billion and €11 billion by 2016. Thus, a loan of €20 billion would be enough for Greece to meet its financial obligations.” The Greek government has emphasised its success in producing a primary surplus (when government revenues exceed expenditures, excluding interest payments on loans). However, this surplus has not yet been confirmed by the EU statistical service. Media reports, including financial newspaper Greek Money, have suggested the claimed surplus is the result of “creative accounting” to the tune of €1.5 billion. Lagarde alluded to the history of ‘creative accounting’ in Greece (see Update 71) in her ABC interview to downplay the Troika’s previous errors, saying “there has been miscalculation, misquotation of numbers”. The negotiations between Troika members and EU states regarding a new loan pivot on their views of the Greek government’s willingness to go through with yet more reforms. Greek newspaper Kathemerini reported in February that “the eurozone and the International Monetary Fund hold the converging view that the Greek debt could be lightened if reforms and privatisations are promoted in Greece. Those least confident in the Greek authorities’ determination to see reforms through believe that a conditional restructuring of the debt would add one more incentive for the opening up of the country’s economy.” MEPs, campaigners denounce Troika’s secrecy and inflexibility -------------------------------------------------------------- The inquiry by the economic and monetary affairs committee of the European parliament into the work of the Troika (see Observer Winter 2014) produced a draft report that was adopted by the committee and referred to parliament in late January. The IMF failed to respond to the committee’s questionnaire, citing its responsibility as being directly to its members only. An IMF spokesperson confirmed in early February that Reza Moghadem, director of the Fund’s European department, did “address” the committee in an off-the-record “closed- door” meeting in late January. The committee’s Austrian Christian Democrat MEP co-chair, Othmar Karas, said in February that the Troika was unaccountable and argued for “more democracy” in its activity. Fellow committee member and French Socialist Party MEP Liem Hoang Ngoc lambasted the Troika as both “opaque” and lacking “legitimacy and transparency”. Remarking on the MEPs’ investigation, The Economist newspaper referred to the Troika as the eurozone “hellhound” of Greek mythology, which in this case had trapped the “country in an economic underworld”, arguing that “reform is overdue” for the trio of lenders. The European Trade Union Confederation submitted a report to coincide with the committee’s inquiry, in which they specifically accused the Troika’s policies of “imposing” an “avalanche of anti-labour measures abolishing key workers’ rights … often under the threat of ceasing loan instalments”. They argued that the “main thrust was to abolish both national and sectoral levels of collective bargaining.” Moreover, they asserted that the justification for the policies in Greece was never fulfilled: “despite massive austerity, and despite a round of debt restructuring, the public debt ratio continues to go up.” ===================================================================== CONDITIONALITY - Analysis 5. IMF blames the victims as markets thow another taper tantrum --------------------------------------------------------------------- Summary - IMF demands yet more reforms in developing countries beset by financial instability and capital flight - Fund says little about impact of rich countries’ policies - Southern countries demand even-handedness from the Fund - Experts blame financial liberalisation ------------------------------------------------------------- The final week of January saw financial and stock markets in many developing countries, along with their currencies, fall sharply. India, Indonesia, Brazil, Turkey and South Africa are being dubbed ‘the fragile five’, a term originally coined in a September study by investment bank Morgan Stanley. These states are now being castigated for their lack of reform and punished by markets for their apparently insufficient global financial integration and liberalisation of their domestic financial systems. The IMF, at the end of the turbulent week, called for “urgent action” in vulnerable states. IMF spokesperson Gerry Rice declared that the IMF was “monitoring [the situation] closely”. José Viñals, director of the IMF’s monetary and capital markets department, called for those developing countries which lack ‘appropriate’ economic poilies to implement “urgent policy action to improve fundamentals and policy credibility”. In its report to the G20 summit in mid February, the IMF advised emerging market economies to adopt “credible macroeconomic polices … alongside exchange rate flexibility” and give “priority … to shoring up fiscal policy credibility”, which usually equates to reduced social spending and higher taxation. The turbulence came in the same week as the IMF once again downgraded its forecast for developing countries, in its January update of the World Economic Outlook. In October 2013, the Fund had already downgraded their growth forecasts for emerging markets, quietly downplaying the continued over-optimism that has plagued IMF forecasting (see Observer Autumn 2014). Our policy, your problem ------------------------ A similar period of financial instability occurred in summer 2013 amid fears of a ‘currency war’ (see Update 85) and even a new currency or debt crisis in emerging market developing countries. A key factor throughout both periods of instability has been the US Federal Reserve’s policy of buying bonds to support their financial system, known as quantitative easing, and their intention to gradually reduce, or taper, the purchases, leading to a dramatic reduction in capital flows to emerging markets. Quantitative easing in industrialised nations had created significant pressures on a number of developing countries. Martin Khor, executive director of the inter-governmental developing country think tank South Centre wrote in February in newspaper the Malaysia Star that “the across-the-board selloff is a general response to the ‘tapering’”, reversing the “financing [which] was moved by investors into the emerging economies”. The South Centre economist Yilmaz Akyuz had pointed out in a July 2013 paper that capital flows to Asia and Latin America during 2010 to 2012 exceeded the previous record levels attained prior to the 2008 financial crisis (see Update 86). Khor argued that the sell-off is therefore not “ad-hoc” but rather a “predictable and even inevitable part of a boom-bust cycle in capital flows to and from the developing countries” resulting from the “deregulation of financial markets and the liberalisation of capital flows”. In the eyes of the Fund however, the burden of adjustment remains with the fragile developing countries. Deputy managing director Min Zhu blogged in January that “emerging market and developing economies have to continually adjust their economic structures and economic policies”. More taper tantrums to come --------------------------- Most economists and market commentators have been keen to downplay the risk of a general crisis and ascribe the fragility entirely to a few states that require more reforms and are vulnerable due to fiscal and current account deficits, falling growth rates and high inflation. Kenneth Rogoff, of Harvard University and former chief economist of the IMF, dismissed the likelihood of a cascade of crises similar to the Asian crisis of the 1990s in February because flexible exchange rate policies mean most developing countries can absorb pressure through currency depreciation acting as a “shock absorber”. Fellow Harvard University professor Dani Rodrik disputed this days later, describing the faith in depreciations as “flawed shock absorbers”. Rogoff, however, did conclude with a warning, questioning “what will happen when the turmoil moves to debt markets? … there is surely more drama to come”. The IMF has been keen to show its commitment to monitoring the global economic risks, part of what it terms its surveillance function, which includes not only producing forecasts via the World Economic Outlook, but since 2011 producing annual spillovers reports which examine the major systemic countries and regions’ financial systems as a source of risk to the rest of the world. The Fund emphasised in February that managing director Christine Lagarde’s August 2013 speech still held true, where Lagarde advocated that “dialogue is important … [especially] for advanced country policymakers”. When Rice was asked if the Fund had a role advocating that the Federal Reserve alter its policies to take into account impacts on developing countries he nuanced the Fund’s position, saying “no, we’re not suggesting anything like that. That’s a matter for the Federal Reserve”, insisting the only actual obligation on richer states be to provide “clear communication”. This chimes with longstanding complaints, reported by the IMF’s Independent Evaluation Office in December 2013, that when it comes to policy advice the IMF is far from willing to criticise its larger, more influential member states (see Update 84). This minimisation of richer states’ obligation to consider the impacts of their policies on developing nations was rejected out of hand by Raghuran Rajan, also a former IMF chief economist and current governor of India’s central bank. Rajan told financial news agency Bloomberg India in January that “emerging markets helped pull the global economy out of crisis starting in late 2008 … industrial countries … can’t at this point wash their hands of [this] and say ‘we’ll do what we need to and you do the adjustment’”. The G20 communiqué released in February discussed advanced economies’ responsibilities toward the rest of the world, but also shied away from implying any obligations on richer states: “We will consistently communicate our actions to each other and to the public, and continue to cooperate on managing spillovers to other countries.” It’s the financialisation, stupid ---------------------------------- Rodrik argued that the “faith in global economic-policy coordination is misplaced” and that the “deeper problem lies with the excessive financialisation of the global economy that has occurred since the 1990’s” which led to “rising inequality, greater volatility [and] reduced room to manage the real economy”. Jayati Ghosh, economist at Jawaharlal Nehru University in India, concurred in February. She explained that the “sell-off of emerging market assets” is a reflection of the “extreme fragility generated by global financial integrations”, adding that these countries “are now so peculiarly integrated into the global financial system that they are part of the collateral damage whenever US monetary or fiscal policy changes”. This dependency has been exacerbated by countries being unwilling and discouraged from adopting policies that would give them greater policy freedom, such as capital controls and resisting liberalisation of their domestic financial sectors (see Bretton Woods Project’s 2011 report). Instead, Ghosh argued that despite their complaints, few developing countries are willing to adopt policies that move away from reliance on even short-term foreign financing rather than “addressing the fundamental fragilities created by financial liberalisation in the first place”. She called instead for a “re- regulation of cross-border finance that would reduce or prevent such destabilising flows.” ===================================================================== INFRASTRUCTURE - Analysis 6. World Bank’s thirst for hydropower --------------------------------------------------------------------- Summary - IFC linked to controversial hydropower project in Guatemala through financial intermediary - Bank postpones decision on much-criticised Inga 3 dam in Democratic Republic of Congo, IFC rumoured to step in - Concerns raised over Bank funding for dams in East Africa, Niger - Bank and IFC funding for hydropower projects in Pakistan confirmed - Proposed Bank funding for Macedonia dam in national park criticised by scientists - Uruguay buys Bank insurance to protect state hydropower company - Bank’s “thirsty energy” initiative raises concerns on viability of hydropower --------------------------------------------------------------------- Community members and indigenous peoples organisations protesting against Hidro Santa Cruz in June 2013 in Barillas, Guatemala --------------------------------------------------------------------- The World Bank has continued its push for hydropower projects (see Bulletin Dec 2013, Observer Autumn 2013, Update 86), including through its private-sector arm, the International Finance Corporation (IFC). After the US appropriations bill in January gave fresh hope for long awaited compensation for the communities affected by atrocities associated with the Chixoy dam in Guatemala (Observer Winter 2014, Update 86, 84), the spotlight has turned to the IFC’s involvement in another controversial dam through a financial intermediary, linked to human rights violations of indigenous communities (see Bulletin Dec 2013, Update 86, 84). In a February open statement, the Guatemalan NGO Departmental Assembly of Huehuetenango (ADH) referred to a five-year conflict over two hydroelectric projects on the Cambalam river being built by Hidro Santa Cruz, a subsidiary of Spanish company Hidralia Energía, resulting in “persecution, intimidation, and co-option of community leaders. There have been assassinations, imprisonment; there is fear and terror.” The statement alleged: “The sad and terrifying story of Chixoy is related to the current persecution … through international financial institutions”, the World Bank and the Inter-American Development Bank. In 2008 the IFC provided $20 million in loans and invested $9.9 million in equity in Corporación Interamericana para el Financiamiento de Infraestructura (CIFI), “a nonbank financial institution that funds small and midsize infrastructure projects in Latin America and the Caribbean”. CIFI in turn invested in Hidro Santa Cruz and the Cambalam project in 2010, with “a long term loan of up to $8.2 million, and a mezzanine facility of up to $2.5 million.” The NGO statement included a call for: “The governments of Europe, Canada and Latin America to investigate and make a public statement against the improper use given to funds provided by the World Bank and Inter-American Development Bank.” In early February, NGOs opposing the Inga hydropower developments in the Democratic Republic of Congo (DRC) celebrated as a heavily criticised Bank proposal for technical assistance to the Inga 3 project (see Observer Autumn 2013, Update 86, 81) was removed from the Bank board’s calendar only days before approval was scheduled to take place. However, the victory was short lived as unconfirmed information emerged that a deal has instead been struck between the IFC and an unnamed Chinese company as a private investor. According to Peter Bosshard, policy director of US-based NGO International Rivers “the IFC deal was arranged by the heads of the World Bank, IFC and USAID behind the scenes, without any accountability to the DRC parliament, the World Bank’s board of directors and civil society. Handing the project over to a private investor will make it even less likely the country’s poor people would benefit from the project.” Prior to the expected board approval, 12 DRC NGOs, including Centre National d’Appui au Développement et à la Participation Populaire, wrote to the Bank’s board members, questioning the project’s focus on “supplying power for export and promoting industrial and mining development” and asked for the energy needs of the DRC population to be prioritised: “Sadly, we the Congolese continue to ask whom this energy is for?” More hydro: East Africa, Niger, Pakistan, Macedonia ---------------------------------------------------- In August 2013 the Bank signed a $340 million deal with Rwanda, Tanzania and Burundi for the cross border 80 MW Rusumo hydroelectric project, scheduled to commence in 2014. However, concerns have been raised over the development impacts of the project, including over the location in an area prone to drought and that it is likely to primarily power the mining industry (see Update 61). In December, Niger secured $172 million from the Bank and other funders to finance the 130 MW Kandadji hydroelectric project. According to a 2011 report by the International Union for Conservation of Nature, the dam would displace 38,000 people. Samuel Nguiffo, coordinator of the Cameroon- based NGO Centre for the Environment and Development, told news agency Thomson Reuters Foundation “communities along the project area have to sacrifice their land and livelihood for little or no benefits.” In January, the Bank agreed to provide over half of the funding for the $1.4 billion first stage of Pakistan’s Dasu hydropower project located on the Indus River. The final project estimated at $7 billion is expected to generate 4,320 MW. According to the Bank’s assessments of the project, 767 households from 34 villages will require relocation. Furthermore, “potential cultural and social conflict” is expected between the local residents and the vast number of migrant labourers required during the construction phase. Moreover, the environmental assessment concluded that due to climate change “glaciers in the Himalaya and Karakorum [mountains] are receding faster than happens in any other part of the world”, confirming that “most of the water of the Indus River originates from glacial melt”. Also in Pakistan, the IFC is due to approve equity investment of up to $125 million for China Three Gorges South Asia Investment Limited in March. The company’s prospective activities include the development and operation of two hydropower projects, the 720 MW Karot and the 1,100 MW Kohala projects. The Bank is considering a $70 million loan for the planned Lukovo Pole dam in Macedonia’s Mavrovo National Park. Furthermore, the European Bank for Reconstruction and Development (EBRD) has committed €65 million for the Boshkov Most dam in the same park. In a January open letter to the World Bank president Jim Yong Kim and the EBRD president Suma Chakrabarti, 119 scientists from around the world urged them to “reconsider your institutions’ position to fund these projects”. According to the scientists: “Not only are these projects threatening specific habitats that this national park provides for many endangered species, they also undermine the very idea of national parks in general [and] violate EU law. … We are surprised that your institutions have even considered supporting these dam projects.” A late January Bank statement clarified that “no decisions have been taken at this point”, and that “all national, EU, and World Bank standards for due diligence will be met … when a detailed design proposal is ready.” Thirsty energy --------------- Despite the Bank’s continued promotion of hydropower, its own research has raised concerns about its viability. In December the Bank completed a $450 million “weather and oil price insurance” agreement for the Uruguay state-owned hydropower company. The transaction will insure the company for the next 18 months “against drought and high oil prices, both of which have had negative financial impacts on the company in the past.” According to the Bank’s press release the “size of the contract is large because the financial risk is significant”, noting that in 2012 “the costs of supplying demand for electricity reached a record of $1.4 billion, far exceeding the company’s original projections of $953 million” due to water shortages. In January, the Bank launched a new initiative on “thirsty energy”, to “help developing countries better plan and manage scaling-up energy capacity to meet rising demand, in tandem with water resource management”. Rachel Kyte, the Bank’s vice president and special envoy for climate change, said: “With demand rising for both resources and increasing challenges from climate change, water scarcity can threaten the long-term viability of energy projects and hinder development.” The initiative follows a June 2013 Bank report with the same name which outlined several problems with hydropower, including that hydropower plants can alter “the timing and flow of the water. This impounded water affects water quality and aquatic life”. Furthermore: “A changing climate and increasing water variability will also affect hydropower as flows shift due to changing precipitation. In addition, glaciers that feed hydropower plants may disappear, thus jeopardising the ability of nations to generate power” noting: “Glacier retreat has already affected the output of hydropower plants in areas of Bolivia and Peru.” It also referenced a 2010 study by US-based NGO World Resources Institute assessing “existing and planned power plants in India and southeast Asia”, which concluded that “over half are located in areas that will likely face water shortages in the future.” In contrast, the report concluded that “wind (which requires virtually no water) and photovoltaic (which requires a small quantity of water to wash the panels) have negligible impacts on the water and energy nexus.” ===================================================================== LAND - News 7. World Bank and agriculture: Cultivating controversy? --------------------------------------------------------------------- Summary - Bank’s push for ‘climate-smart agriculture’, with new joint initiative to be launched in September, criticised by CSOs - New Benchmarking Business in Agriculture website promotes rankings - Inspection Panel case on forced labour in Uzbekistan cotton fields postponed for up to12 months --------------------------------------------------------------------- As part of its priorities on climate change, the World Bank has continued to push for “climate-smart agriculture” (see Update 85, 83). An early December 2013 conference on agriculture organised by the governments of South Africa and the Netherlands, in collaboration with partners including the UN’s Food and Agriculture Organisation and the World Bank, announced plans to establish an Alliance on Climate Smart-Agriculture (CSA). It will be based on three pillars: sustainability of agricultural productivity, adapting and building resilience to climate change, and mitigating greenhouse gas emission. The alliance is likely to be launched at a September UN leaders’ summit. The announcement followed another failed attempt by the Bank to get agriculture firmly established on the UN Framework Convention on Climate Change (UNFCCC) agenda in the November 2013 negotiations in Poland. According to Rachel Kyte, the Bank’s vice president and special envoy for climate change, “delegates opted to delay again discussions of agriculture. This decision … reveals the discomfort negotiators still feel around the science and priorities of what we consider ‘climate-smart agriculture’.” The Bank’s involvement in the UNFCCC negotiations has raised concerns by NGOs due to its push for “soil carbon” as part of its climate- smart agriculture approach (see Update 83, 80, 79). A press release by international peasant movement La Vía Campesina and international NGOs GRAIN and ETC Group prior to the climate meeting criticised the planned new alliance arguing that the proposal “entails nothing more than business as usual: new genetically modified seeds developed by biotechnology corporations, more chemical fertilisers and pesticides by agrochemical giants, and more ‘bio-intensive’ industrial plantation farming.” Elizabeth Mpofu from La Vía Campesina said: “Rights over our farms, lands, seeds and natural resources need to remain in our hands. … We will not allow carbon markets to turn our hard work into carbon sinks that allow polluters to continue their business as usual.” In January the Bank launched a website for its agriculture initiative Benchmarking the Business of Agriculture (BBA, see Observer Autumn 2013, 85, 83). The initiative follows in the footsteps of the Bank’s Doing Business report, but is unlikely to step away from the much criticised rankings (see Observer Autumn 2013, Update 86). Instead the website confirms that “rankings will be considered”, since “benchmarking produces comparisons and contrasts that will stimulate policy change”. Forced labour in Uzbekistan cotton fields ------------------------------------------ The Bank’s support for agriculture in Uzbekistan was criticised in a September 2013 submission to the Bank’s accountability mechanism, the Inspection Panel (IP), by three NGOs, including the Human Rights Society of Uzbekistan Ezgulik, on behalf of “farmers, children, university students, public-sector workers, private-sector workers and parents who have been forced to provide labour to the government- controlled agricultural system”. The submission referred to the Bank’s 2008 $68 million investment in the Second Rural Enterprise Support Project (RESP-II, see Update 74), and an agreed further $40 million in additional financing in 2012, with the objective “to increase the productivity and financial and environmental sustainability of agriculture and the profitability of agribusiness in the project area”. According to the submission: “The harm suffered is due to the project’s investment in an agriculture sector underpinned by government orchestrated, forced labour, without adequate measures in place to prevent World Bank funds from contributing to such forced labour”, with particular reference to cotton production. Furthermore, it claimed there was no “genuine attempt by the Bank to address the real risk of child labour”. A November response by Bank management rejected the complaint: “the harm described by the requesters is not caused nor aggravated by the project, and as such is unrelated to any failure by the Bank to apply its policies and procedures”, but confirmed that it will “continue to encourage the government to adhere to national labour laws”. The IP concluded in December 2013 that “the project is plausibly linked to the harms alleged in the request”, but in light of “significant positive trends … with respect to the critical issue of child labour”, the Panel “will report back to the board within 12 months on whether a full investigation is warranted.” Nevertheless, the $40 million additional financing for RESP-II was formally signed off in early February, but is yet to be disbursed. ===================================================================== SOCIAL SERVICES - NEWS 8. World Bank’s Burma spending spree --------------------------------------------------------------------- Summary - Bank heavily investing in Burma electricity supply - Critics contend package will lead to huge prices rises for poor households - Bank telecoms privatisation criticised by over 60 civil society groups for ignoring human rights and local community views - Other Bank programmes in pipeline include public management, education and luxury accomodation --------------------------------------------------------------------- After its prolonged absence from Burma (also known as Myanmar) the World Bank has been making up for lost time (see Observer Winter 2014, Update 84, 82.) During a late January visit Bank president Jim Yong Kim outlined a $2 billion “multi-year” package aimed at improving “access to energy and health care for poor people”. $200 million of International Development Association (IDA, the Bank’s low income-country arm) funding was set aside for meeting the goal of universal health coverage by 2030, whilst $1 billion of the package, which includes International Financial Corporation (IFC, the Bank’s private sector arm) funding was allocated for electricity. Alongside a press release quoting that over 70 per cent of people in Burma do not have access to reliable electricity Kim declared end January that “electricity helps bring an end to poverty”. He also confirmed that the Bank will pursue private investments, and “public- private joint ventures for large new power stations”. The Bank’s investment comes on the back of a $140 million World Bank loan for a gas power plant refurbishment, agreed in October 2013 (see Observer Winter 2014) $60 million loan from the Asian Development Bank (ADB), announced in December 2013. Details emerged end February of the IFC’s plans to transform the country’s power supply into what the Wall Street Journal described as a “corporate entity” in which the IFC would take “an equity stake”. Karin Finkelston, IFC vice president for Asia-Pacific, said:“A big part of our goal is to bring in private sector partners”. She confirmed that one of the project aims was to turn the Yangon City Electricity Supply Board, one of the city’s largest power distributors into a “”sustainable, self-financing institution.” The energy sector reforms, linked to unaffordable price rises, remains heavily controversial. In mid-November the government announced it was pressing ahead with planned reforms which would incur a 43 per cent increase to household bills (see Observer Winter 2014) however, in a concession to protesters it delayed the price rises until the 2014-15 fiscal year. According to the Myanmar Times in mid February the reforms have been subject to further parliamentary delays, officially to allow the president to comment, “based on suggestions from the World Bank”; unofficially a senior government source said: “The two ministries cannot negotiate [a solution] on matters related to electricity charges”. The ADB, itself an interested partner, has weighed in: “In order to ensure the financial viability of the power sector … either tariff rates need to be increased, or even greater government subsidies, paid for by taxpayers, will be required,” Jong-Inn Kim, lead energy specialist at the ADB, told the Diplomat international magazine end January. Financial viability may come at the expense of affordability for poor people. Telecoms controversy -------------------- Bank investment in Burma’s telecoms sector has also proved divisive. A $31.5 million IDA loan, approved by the board in early February, aims to “expand quality mobile phone access and affordable communications” and develop an e-government portal for citizens to conduct transactions including “provid[ing] … feedback about poor service delivery or incidents of corruption”. Civil rights groups are increasingly concerned about potential human rights violations by the project. An end January letter to the Bank, signed by over 60 civil society groups from Burma, accused the Bank of choosing “to ignore … fundamental issues of privacy, human rights, and surveillance” and holding a consultation process which was a “disappointment”. During “one brief and hastily scheduled meeting” in November 2013, groups were told that the serious concerns identified by the Bank itself in October 2013, that Burma “presently does not have explicit privacy, right to information or cybercrime legislation”, were “secondary concerns” which will not be addressed in the telecoms project. The letter went on to warn that “the World Bank has downplayed the impacts of moving international service operators into rural, ethnic areas” in the face of “Burma’s pervasive business and land corruption, and ongoing ethnic conflict”. Additional projects in the Bank’s pipeline include a $30 million loan to modernise Burma’s public financial management, an $80 million loan for the Ministry for Education to fund cash stipends and scholarships in schools, along with a $80 million loan for a luxury Yangon hotel and apartments (see Bulletin Feb 2013). Civil society groups have accused the Bank of neglecting to consult with community groups and civil society to establish their real needs and priorities. Khin Omar from Thailand-based NGO the Burma Partnership commented: “The Burma government still spends a disproportionate amount of its annual budget on its military at the expense of health and education. The World Bank … must consult widely with civil society and affected communities and follow its own safeguard policies. Otherwise it potentially risks legitimising the Burma government’s debilitating and counterproductive policy of prioritising military offensives over the dire need for improved health and education for its own people”. ===================================================================== ENVIRONMENT - News 9. World Bank’s mining treasure map --------------------------------------------------------------------- Summary - Bank promoting “billion dollar map” of natural resources in Africa - IFC puts up $65 million for Gabonese off-shore oil - IFC-funded mine in Colombia linked to murder of indigenous activists - Haitian campaigners decry Bank conflicts of interest in rewriting Haitian mining law - Civil society says Camisea gas expansion in Peru, reliant on IFC- funded pipeline, violates international law -------------------------------------------------------------------- At a global mining conference in early February in South Africa, a World Bank Group staffer announced that the Bank is going to launch a so-called “billion dollar map” to map the mineral resources of Africa. The project, which seeks to consolidate mineral geodata coverage for all of Africa using satellites and airborne surveys, “will unlock the true worth of Africa’s mineral endowment” according to Tom Butler, mining specialist at the Bank’s private sector arm, the International Finance Corporation (IFC). Media reported that the Bank has already put forward $200 million, and aims to formally launch a $1 billion fund in July to pay for the five-year project. Paolo de Sa, the Bank’s oil-gas-and-mining unit head, indicated that if the project goes well the Bank may try to replicate it for South America. The idea for this mapping project first surfaced in 2012, when Bank official Marcelo Giugale mentioned not only minerals but also hydrocarbons and gas reserves. This has led to worries that the mapping work will facilitate more fossil fuel extraction, despite continued rhetoric from the Bank about the need to move away from fossil fuels to tackle climate change (see Update 86, 83). In late November 2013 the IFC invested $60 million in UK-headquartered Delonex Energy to fund the company’s oil and gas exploration in East and Central Africa. In late January, the IFC completed an agreement to lend $65 million to US-based VAALCO Energy for further off-shore oil exploration and development in Gabon. This is the third IFC investment in VAALCO’s Gabon extraction. Yet at a press conference at the World Economic Forum in Davos, Switzerland in late January, Bank president Jim Yong Kim argued that to tackle climate change “so-called ‘long-term investors’ must recognize their fiduciary responsibility … every company, investor, and bank that screens new and existing investments for climate risk is simply being pragmatic.” Mining impacts in Latin America Debate has followed the Bank Group’s extractive industry efforts in Latin America and the Caribbean. In 2013 controversy erupted in Peru and the Dominican Republic over Bank-funded mining projects (see Bulletin Dec 2013). The Bank, and especially the IFC, is viewed as a key enabler for uncertain projects, reassuring other investors and making projects seem less risky. The early January assassination of two indigenous peoples leaders in western Colombia was linked by NGO Amnesty International to the indigenous community being “opposed [to] the arrival of paramilitaries wishing to develop drug cultivation on their lands and the arrival of powerful coal, copper and gold mining interests in the area.” In mid December 2013, the IFC approved an equity investment of more than $5 million in Colombian Mines, a Canadian mining company, for gold exploration near the town of El Dovio, where the two leaders of the Embera Chamí indigenous community were stabbed to death. Community organisations have denounced the killings. At end February, the IFC is expected to approve a $50 million loan to Canadian mining company Guyana Goldfields, as part of a $200 million debt package for the $300 million project to run an open pit gold mine in the middle of a remote rainforest in north western Guyana. The IFC has already invested over $26 million in equity stakes in Guyana Goldfields in 2006 and 2009. The project may be an early test of the new US legal provision which requires US representatives on the board of the World Bank to oppose projects in intact tropical forests (see Observer Winter 2014), though a US vote against the project would not necessarily stop it moving ahead. In August 2013, the Bank Group was accused of a conflict of interest in Haiti, as it both invests in private mining companies and is helping the Haitian government to redraft its mining code. A coalition of social movements and NGOs called the Kolektif Jistis Min nan Ayiti (Haiti Mining Justice Collective) is organising communities to protect their rights and the environment. The expansion of the Camisea gas field in Peru continues to draw criticism (see Observer Autumn 2013). Export of gas from the fields relies on the controversial IFC-funded Peru LNG pipeline (see Update 60), which when approved in 2007 required the development of an indigenous peoples development plan that included consultation with groups affected by “upstream facilities” including in the area where the expansion is being planned. In mid January, a report by UK NGO Forest Peoples Programme on the plans to expand gas field found it “risks causing further negative impacts for isolated groups” in the the Kugapakori-Nahua-Nanti and Others’ Reserve, the area of the Camisea fields where the expansion is proposed. The report also found that the expansion “threatens to violate their fundamental rights to life and a healthy environment, territorial and cultural integrity and self-determination. … This project threatens their very existence and survival as indigenous peoples.” ===================================================================== PRIVATE SECTOR - News 10. Shopping mall Shangri-La: IFC’s lending for luxury --------------------------------------------------------------------- Summary - IFC boosts investments in deluxe and 5-star hotels in Burma, Tanzania, Ethiopia and Zambia - Support to luxury shopping malls in Kenya and Nigeria supposed to boost “food security” --------------------------------------------------------------------- Recent IFC hotel investments Overview Claimed development outcomes Status Partner company Deluxe hotel and serviced apartments in Yangon, Burma (also known as Myanmar) $80 million loan for the construction and refurbishment of the existing 485-room Traders Hotel in downtown Yangon; and development of a 240-room Shangri-La branded service apartments complex Construction of critical business infrastructure Improvement of hotel service standards Employment creation and knowledge transfer Benefits to the local economy and local linkages Increase in tax revenues and foreign exchange Private sector development by sending a positive signal about Burma, particularly to other foreign investors Board approved on 19 December 2013IFC information Shangri-La Asia, headquartered in Hong Kong and Kuok Limited based in Singapore; both controlled by Robert Kuok, who according to financial news agency Bloomberg is Southeast Asia’s richest man with a net worth of $15.8 billion Peacock Lounge, Traders' Hotel Yangon Peacock Lounge, Traders’ Hotel Yangon 5-star hotel and office in Dar es Salaam, Tanzania $11 million loan for a 32-storey twin tower complex which will comprise a 250 room five-star hotel, an office and retail building, and a car park Filling the large gap between demand and supply for quality commercial space in Dar es Salaam Job creation Increased government revenues Contribution to the enhancement of Dar es Salaam business infrastructure Board approved on 21 April 2010, contract signed 5 December 2013IFC information China Railway Jianchang Engineering, ultimately owned by China Railway Group Ltd, the largest integrated construction group in China and Asia and the third largest contractor in the world based on total revenue The Mwalimu Nyerere Foundation Building Project The Mwalimu Nyerere Foundation Building Project Crowne Plaza hotel in Addis Ababa, Ethiopia $19 million loan for a 210-room, 11-storey business hotel Provision of modern business infrastructure Migration of best practice in global hotel management Employment creation Benefits to local suppliers Increased tax revenues Board approval scheduled for 17 March 2014IFC information Tsemex Global Enterprise, Ethiopian business; the project will be branded “Crowne Plaza” hotel under a full management contract with brand owners International Hotels Group (IHG) 3-star hotel in Ndola, Zambia $4.5 million loan for an 80-room 3-star Protea branded hotel in the Copperbelt town Business infrastructure development Employment generation Linkages to the local economy Board approval scheduled for 20 February 2014IFC information Union Gold Zambia; Protea Hotel brand bought by Marriott International in January 2014 Recent IFC shopping mall investments Overview Claimed development outcomes Status Who benefits? Location of company? Garden City Shopping mall in Nairobi, Kenya $37 million loan and $8.2 million equity investment in the largest shopping mall in East Africa combined with 421 residential units Urban development: the expansion of the city of Nairobi Provision of modern retail infrastructure for “reputable international retailers” Access to property for citizens Job creation Benefits to local suppliers Increased tax revenues Development of the private sector: the project will stimulate two key sectors of the economy, retail and property, with multiplier effects Board approved on 1 July 2013IFC information ARE2, a private equity fund managed by UK-based fund manager Actis, formerly part of UK government-owned Commonwealth Development Corporation* Garden City Nairobi Garden City Nairobi Jabi Lake shopping mall in Abuja, Nigeria $10 million equity investment in a shopping mall of “international standard” Provision of critical business infrastructure Provision of a growth platform for local small and medium enterprises (manufacturers and wholesalers) in the retail value chain (owners of stores within mall) “Improvement of food security” as a result of increased distribution outlets for local farmers leading to increased demand for local products (fresh produce in particular, but also locally processed foods) Improvement in hygiene, health and safety standards in the food retail sector Serve as a catalyst for urban development: “development of better aesthetic environments” Creation of employment Generation of tax revenues Transfer of operational and environmental & social best practices Board approved on 30 December 2013IFC information AR2, a private equity fund managed by Actis* Jabi Lake development Jabi Lake development * AR2 and ARE2 both refer to the Actis Africa Real Estate Fund 2. The IFC separately took a stake in the $278 million fund with a $25 million investment in June 2011 ===================================================================== FINANCE - Background 11. IMF lending facilities to low-income countries --------------------------------------------------------------------- Summary - The IMF’s lending facilities to low-income countries were reformed in 2010 in the wake of the financial crisis - New regime aims to provide greater tailoring and policy flexibility - Lending mechanisms consist of: Extended Credit Facility, Standby Credit Facility, and Rapid Credit Facility, all currently charge zero interest - Poverty Reduction and Growth Trust finances the concessional element of lending to the LICs - Policy Support Instrument, a non-financing programme, monitors LIC economies - Policy reviews happen every two years, next review expected in 2015 --------------------------------------------------------------------- The April 2009 G20 meeting in London agreed to reform the IMF’s lending to low-income countries (LICs). The new lending facilities came into effect in 2010 (see Update 67). The lending mechanisms for LICs consist of: the Extended Credit Facility (ECF), the Standby Credit Facility (SCF), and the Rapid Credit Facility (RCF). The ECF, which provides loans over the medium to the long term, is the most commonly used mechanism. Lending programmes are normally for three years, but can be extended to a maximum of five years. Following expiration, an additional loan can be given. Countries with prolonged balance of payment needs are eligible for ECF. Access is set at 120 per cent of quota (based on country’s financial commitment to the IMF) per arrangement, but is determined on a case-by-case basis. The norm is 75 per cent of quota if the country’s total concessional credit outstanding is 100 per cent of quota or above. As of December 2013, there are 17 countries with an ECF agreement with total overall approved lending equalling $2.8 billion, excluding outstanding credit from expired loans. The SCF provides financial and policy assistance to countries with short-term financing needs caused by shocks or policy failures expected to be resolved within two years. The SCF can also be used on a precautionary basis by countries currently not facing financing issues, but that might do so in the future. It is offered for a period of 12 to 24 months. It is normally limited to 2.5 years, but can be extended. It normally carries a 0.25 per cent interest rate. SCF lending limits are normally set at 120 per cent of quota, but it depends on prior lending history with the Fund. As of December 2013, Tanzania and Georgia have SCF agreements totalling $422 million. In financial year 2012, Georgia and Solomon Islands had SCF agreements totalling $201 million. The RCF is an emergency loan intended for countries facing immediate shortages of finance, for instance following natural disasters or shocks. RCF is provided rapidly as a one-off sum and does not require programme-based conditionality or reviews. Access to the RCF is set to 25 per cent of quota per year and 100 per cent of quota on a cumulative basis. There are currently no RCF arrangements, but some developing countries have called for greater use of RCF facilities and increased availability. Between 2009 and 2012, eight countries used the RCF, some of which now have ECFs as longer term loans, including Côte d’Ivoire, Nepal and Yemen. The ECF involves the most conditionality, whilst the RCF has the least. Interest rates for all mechanisms are reviewed every two years, and the next review is at end-2014. Loans currently carry zero interest rates throughout 2014, followed by a 0.5 per cent rate thereafter (except SCF with a 0.25 per cent interest rate). ECF and RCF loans mature after ten years and SCF after eight years. Apart from the SCF (which has a four year grace period), the lending mechanisms have a grace period of five and a half years, meaning loans begin to be repaid after that period. Demand for concessional lending went up from $1.23 billion in the period 2001 to 2008, to $2.47 billion between 2009 and 2012. The number of LICs with an IMF agreement also increased, from 38 countries in 2007 to 51 in 2010. The Policy Support Instrument (PSI) is a free of charge service designed to provide support without a loan arrangement (see Update 71, 48). It involves semi-annual programme reviews and policy conditions, identical to the loan facilities’ conditionality. In order for LICs to qualify for a PSI, they need to demonstrate a policy framework focused on creating macroeconomic stability, debt sustainability and “structural reforms in key areas in which growth and poverty reduction are constrained”. In the case of short-term financing needs, the PSI may be used in combination with the SCF and the RCF, but not the ECF. To date, seven countries have utilised the PSI: Cape Verde, Mozambique, Nigeria, Rwanda, Senegal, Tanzania and Uganda. According to the Fund’s website, the lending mechanisms aim to provide lending on more concessional terms than before and “improve the tailoring and flexibility of Fund support”. They intend to increase flexibility by no longer binding countries to structural performance criteria, which the Fund has replaced with benchmarks. The lending mechanisms are also supposed to increase the focus on poverty reduction compared to previous lending windows and each programme request has to provide information on how loans will impact on poverty reduction and growth. For instance, LICs applying for concessional lending should present “specific targets to safeguard social and other priority spending”. The LICs’ concessional financing is funded through a dedicated account at the Fund called the Poverty Reduction and Growth Trust (PRGT). The Fund projects that the PRGT should be able to accommodate a $1.25 billion annual lending capacity. It is expected to be self- sustainable and is financed through the IMF’s own accumulated funds, bilateral donor contributions and member states re-investing their portion of the gold sales windfall policy (see Update 84). Projected average annual demand for PRGT resources are estimated by the Fund to range between $1.85 billion and $3.24 billion for the period 2013 to 2035, according to the IMF’s 2013 review. An April 2012 report written by Development Finance International, an advocacy and research organisation based in London, on IMF LICs lending found no evidence of a “strong emphasis on poverty alleviation and growth”, particularly because many of the PRGT countries do not have a social expenditure floor or go below the floor. The same report stated that LICs governments perceive little change between benchmarks and the prior approach using performance criteria. The 2013 review --------------- In April 2013, the IMF executive board held its second review of the LICs lending facilities (the first was in 2012). It was restated that the PRGT should be self-sustainable. In order to achieve this, the use of blending (mixing concessional lending with lending from the Fund’s General Resource Account), was reaffirmed. This implies that better-off countries should make increasing use of non-concessional lending. Only the poorest and most vulnerable countries will be granted 100 per cent concessional lending. Three microstates were added to the list of countries eligible for concessional lending: the Marshall Islands, Micronesia and Tuvalu, whilst Georgia and Armenia were taken off the list. The Fund also removed some of the restrictions on the precautionary SCF lending facilities, for instance, the period a country does not face a balance of payment problem will no longer count towards the SCF time limit. The procedural qualification requirements to enter a PSI agreement were also eased. The next review is expected to take place in 2015. ===================================================================== FINANCE - News 12. Malawi’s cash-gate scandal --------------------------------------------------------------------- Summary - The IMF has restarted its programme in Malawi after alleged looting of government money in 2013, releasing a $20 million disbursement. NGOs have voiced their dissatisfaction with the IMF, as well as the government over the failure to publish an audit upon which Fund's decision was based. --------- In January, the IMF disbursed around $20 million to Malawi having previously suspended disbursements to Malawi n October because of allegations of massive looting of government money, which erupted in September 2013. In February, a forensic audit report conducted by independent auditors had been submitted to the IMF prior to its decision to restart disbursements. John Kapito of the Consumer Association of Malawi complained that the IMF’s decision to release the disbursement “smells of double standards and a lack of understanding of local economics and politics”. CSOs in Malawi including the Centre for Human Rights and Rehabilitation (CHRR) and Centre for the Development of People (CEDEP) voiced their dissatisfaction with the government for ignoring their demand to make the audit report public and more transparent. In a joint statement in January they said that “the publishing of the two documents will clear the suspicion as well as enhance the credibility and acceptability of the forensic audit by the general public.” Kapito explained that “the $20 million [disbursement] by the IMF is seen as a slap in the face of the many Malawians who until today are not told the events surrounding the cash gate looting”, adding that he is “happy that … [Malawi's] donors have not followed the IMF’s direction”. Malawi’s donors that withheld funds are, according to reports, planning to meet in March to discuss whether to release aid funds. ===================================================================== IFI GOVERNANCE - News 13. Bank develops “citizen engagement” strategy --------------------------------------------------------------------- Summary - The World Bank has launched a consultation on its new strategy to mainstream a coherent approach to citizen engagement. --------------------------------------------------------------------- In February, the World Bank Group (WBG) launched a consultation on its new citizen engagement strategy. The development of the strategy follows the October 2013 launch of the Bank Group’s new strategy (see Observer Winter 2014), which promised to “strengthen its ability to work on multi-stakeholder solutions”, including the need to “revamp the client engagement model into a more problem-driven solutions approach, systematically bringing together multiple disciplines, stakeholders, and WBG agencies.” The objectives of the citizen engagement strategy are to “mainstream a coherent approach to citizen engagement in WBG-supported policy dialogues, programmes, projects and knowledge work to improve their development results” and “contribute to building sustainable national mechanisms for citizen engagement with governments and the private sector”, adopting a “context-specific approach”. It will “build on experience from existing citizen engagement efforts in areas such as service delivery, public financial management, environmental protection and natural resource management, governance, and social inclusion.” Furthermore, it will “build on entry points for citizen engagement from existing WBG policies”, referencing the safeguards consultations (see Observer Winter 2014) and grievance redress mechanisms (see Bulletin Feb 2014), however, it is unclear how it will work with these. Concerns raised in a mid February consultation meeting in the UK included questions on engagement of formal versus informal institutions, how to avoid repercussions for citizens in authoritarian regimes, and the need for upstream rather than downstream consultation, including asking the right questions at the right time. In addition to further consultations in the US, an online consultation is open until 12 April. The Bank is also setting up an advisory council “to accompany the development and implementation of the strategy”, open for nominations until 5 March. The new strategy is expected to be rolled out in 2015. ===================================================================== FINANCE - News 14. Program-for-Results review launched --------------------------------------------------------------------- Summary - The Bank is launching a review of the controversial Program-for- Results instrument which was approved in early 2012. --------------------------------------------------------------------- In late November 2013, the World Bank board discussed a concept paper for a review of the Program-for-Results (PforR) lending window, a results-based financing mechanism agreed in January 2012 (see Update 79, 77). At the time of approval, the Bank promised a cap of 5 per cent of total funding commitments and a “rigorous” review after two years to respond to civil society criticism about the lack of applicability of the Bank’s safeguards and developing countries’ need for upfront financing. According to the Bank: “the review aims to assess the early experience with the design and implementation of PforR operations and to identify early lessons and recommendations.” The review, being run internally by the operations policies and country services department, will include: literature and desk reviews; surveys of Bank and country officials; interviews with Bank staff, country officials and “other stakeholder groups that have been directly involved in the PforR dialogue”; and “consultations with key stakeholders”. According to the Bank’s website: “the schedule for consultations will be posted by the end of February 2014.” The review is expected to be discussed with the board by July. ===================================================================== CONDITIONALITY - News 15. Grenada: IMF admits failures --------------------------------------------------------------------- Summary - IMF admits its programme in Grenada ignored vital information and was based on false assumptions, as trade unions predict damaging consequences of wage freeze --------------------------------------------------------------------- In December 2013, the IMF released an ex post assessment (EPA) of its 2006-2011 lending programme to Grenada. The IMF examined its $28 million loan (see Observer Winter 2014) and concluded that Grenada failed to meet key structural reform measures. The report, compiled by the Fund staff, admits that the “too optimistic” programme failed to take into account Grenada’s political and institutional constraints, and that “programme ownership was also in question”. The EPA identified lessons that should inform the designs of future programmes, as the IMF projections repeatedly missed Grenadian reality by assuming positive outcomes in a country in crisis. In early February, the government proposal of a three-year wage freeze, seen as a precondition for a new IMF loan, was rejected by Madonna Harford, head of Grenada’s Trade Union Congress, as it “would leave public sector workers at a disadvantage in the long run”. ===================================================================== KONWLEDGE - News 16. Lagarde – equality champion? --------------------------------------------------------------------- Summary Lagarde discusses income inequality in UK speech and cites Oxfam paper that criticises IMF but ignores recommendations to reduce income inequality --------- During a UK February speech, IMF managing director Christine Lagarde called for “21st century multilateralism to get to grips with big ticket items like inequality,” acknowledging that income inequality “leads to an economy of exclusion and a wasteland of discarded potential.” In her speech, Lagarde quoted a mid-January report by NGO Oxfam International, including the finding that today, “the bottom half of the world’s population owns the same as the richest 85 people in the world.” The Oxfam report argued that the IMF supported “harsh austerity measures have not delivered the expected results in terms of growth and recovery, and have in fact harmed the prospects for growth and equality.” Lagarde has subsequently raised the issue on a number of occasions. The report proposed six measures to reduce income inequality, including the need to strengthen wage floors and worker rights and cracking down on financial secrecy and tax dodging, however Lagarde did not address these in her February speech, or on other occasions when she has highlighted the issue. After the speech Nicolas Mombrial of Oxfam International still hoped that “this is a green light for governments to use fair tax systems and investments in health and education to reduce damaging income inequality.” ===================================================================== LAND - News 17. Complaint filed against IFC funded Lafarge mining operation --------------------------------------------------------------------- Summary Khasi indigenous people in Indian state of Meghalaya have filed a complaint with the CAO over illegal land infringement by French multinational Lafarge's Bangladeshi cement plant. --------- In January, an indigenous community in north east India affected by an International Finance Corporation (IFC the World Bank’s private sector arm) funded cement factory filed a complaint with the Compliance Advisor Obudsman (CAO), the IFC’s accountability mechanism. The Lafarge Surma Cement (LSC) Project, run by French multinational Lafarge received a loan of $45 million from the IFC in 2003. The project is based in northern Bangladesh but sources its raw materials from Meghalaya state in India. Land owners from the Khasi indigenous group, based in Meghalaya, complained that Lafarge have illegally infringed upon their land without consent, whilst also causing environmental destruction (see Update 70). They wrote in the complaint that they “have been denied justice” and invited the “CAO to investigate and take actions most appropriate and suitable for the worst affected of all by this project.” The CAO found the complaint eligible for assessment, and has initiated the investigation process. ===================================================================== IFI GOVERNANCE - News 18. IFC funded Tata Mundra coal plant to be investigated by ADB --------------------------------------------------------------------- Summary IFC funded 4000 MW coal plant, Tata Mundra, is to be investigated by ADB for negative social and environmental impacts. --------- The Asian Development Bank (ADB) has approved the recommendation of its accountability mechanism, the Compliance Review Panel (CRP), for a full investigation into Tata Mundra in January. Tata Mundra, a 4,000 MW coal plant in Eastern India, funded by the International Finance Corporation (IFC), the World Bank’s private sector arm since 2007, and the ADB, has received criticism for its negative social and environmental impacts (see Update 82). In October 2013, the Compliance Advisor Ombudsman (CAO), the IFC’s accountability mechanism, concluded its investigation into the plant, finding that the project did pose significant social and environmental risks however, the IFC rejected the CAO findings (see Bulletin Dec 2013). The CRP also found evidence of noncompliance with ADB policies, concluding that this “is serious enough to warrant a full compliance review.” Madhuresh Kumar of the Indian social movement, National Alliance of People’s Movements said in January, “ADB reviewing its policy compliance in Tata Mundra gives hope that people’s concerns will be looked into. We hope appropriate and timely actions will be taken on the findings.” The compliance review is underway although it is still uncertain as to when the final report will be published. ===================================================================== FINANCE - News 19. World Bank guarantees policy reform --------------------------------------------------------------------- Summary - The World Bank draft published a proposed new operational policy on guarantees. --------------------------------------------------------------------- In November 2013, the World Bank published a draft of a proposed new operational policy on guarantees. Guarantees are designed to help extend the reach of private financing by mitigating perceived risk and encouraging private sector involvement in developing countries. The proposed reform aims to “support a fuller and more effective use of Bank guarantees in country engagements to leverage Bank resources in delivering critical infrastructure and reform programmes to reduce poverty and foster shared prosperity.” It has been proposed that guarantees will be governed as an alternative form of financing within a single policy framework that governs both guarantees and loans. The draft reform would open access to all types of Bank guarantees; lift unwarranted restrictions that currently limit the Bank’s opportunities to help mobilise financing for development needs; incorporate Bank guarantees into Investment Project Lending and Development Policy Lending; clarify aspects that were inhibiting the use of Bank guarantees; and modernise the policy to make it more flexible. If approved, the new policy will take effect in July 2014. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + February 2014 Bretton Woods Bulletin An update of news and action on the World Bank and IMF Published by Bretton Woods Project Critical voices on the World Bank and IMF No permission needed to reproduce articles. Please pass to colleagues interested in the Bank and Fund. The Bulletin is available on the web and by e-mail. It is also available in Spanish. 33-39 Bowling Green Lane London, EC1R 0BJ United Kingdom +44 (0)20 3122 0610 Subscribe at or The Bretton Woods Project is an ActionAid-hosted project. This publication is suported by a network of UK NGOs, the C.S. Mott Foundation, Rockefeller Brothers Fund and the European Union. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + END