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Bretton Woods Observer Summer 2014
A quarterly critical review of developments at the World Bank and IMF

Published by BRETTON WOODS PROJECT
Working with NGOs and researchers to monitor the World Bank and IMF

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1.  The rise of the infrastructure giants (INFRASTRUCTURE/Analysis)
2.  World Bank-funded mines threatening livelihoods
(ENVIRONMENT/Analysis)
3.  ICSID problems in the spotlight (TRADE/News)
4.  IFC-linked rubber firm project paused (LAND/ News)
5.  Comment: Tata Mundra: making a mockery of accountability by
Bharat Patel, Machimar Adhikar Sangharsh Sangathan, and Himanshu
Damle, Bank Information Center  (Infrastructure/commentary)
6.  IMF: Ukraine’s “tough programme”; Egypt
next?(CONDITIONALITY/Analysis)
7.  Ghana under pressure: IMF loan feared  (FINANCE/News)
8.  Big banks & IMF: No structural reform (PRIVATE SECTOR/News)
9.  Inside the Institutions: IMF publications  (IFI
GOVERNANCE/Background)
11. Business as usual: World Bank rejects Doing Business reforms
(KNOWLEDGE/Analysis)
10. World Bank’s climate change crusade: rhetoric or reality?
(Environment/analysis)
11. Global Partnership for Oceans: World Bank fishing in troubled
waters? Guest analysis by Nathalie Rey, Greenpeace International
(ENVIRONMENT/news)
12. Reproductive health: What’s the Bank’s score? Guest analysis by
Preethi Sundaram, International Planned Parenthood Federation (SOCIAL
SERVICES/Analysis
13. World Bank forests projects under fire (ENVIRONMENT/Analysis)
14. Argentina’s creditors “vulture-like behaviour”(FINANCE/News)
15. Further delays for Bank safeguards review (RIGHTS/news)

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TOPIC: INFRASTRUCTURE
Analysis


1. The rise of the infrastructure giants - Bank’s infrastructure
hegemony challenged in Asia

Abstract
World Bank faces increased competition over large scale
infrastructure in Asia, with the Asian Infrastructure Investment Bank
and the BRICS Bank.

------------------------------------------------
Summary
- World Bank faces competition from new Asian Infrastructure
Investment Bank (AIIB), BRICS Bank, to fund large-scale Asian
infrastructure
- China invites Nepal to join AIIB, as World Bank increases stake in
hydropower sector
- IFC push for public-private partnerships, energy for export
- IFC Pakistan hydropower funding approved, US abstains due to
environmental risks


With massive infrastructure projects seeking funds, the World Bank is
facing increased competition from new players in Asia, with China
launching the Asian Infrastructure Investment Bank (AIIB) and the new
Brazil, Russia, India, China, South Africa (BRICS) Bank (see Bulletin
Feb 2014, Update 85) expected to be launched in July, largely
focusing on infrastructure finance. But questions remain about
potential negative social and environmental impacts, with none of the
players adequately engaging with local communities.

As the World Bank develops a new Global Infrastructure Facility
(GIF), a proposed platform for facilitating complex infrastructure
projects (see Bulletin May 2014), further details have emerged on the
planned BRICS Bank. According to information leaked to news agency
Reuters in late May the bank is likely to be agreed at the mid July
BRICS summit in Brazil. With expected start-up capital of $50 billion
shared equally between the countries, the bank will aim to start
lending in two years time. Borrowers are expected to benefit from
lower costs and a presumed lack of interference in economic affairs.

One issue of contention slowing the negotiations was China’s
unsuccessful attempt to gain a larger stake in the BRICS Bank by
putting in more capital. While retaining its involvement in the BRICS
Bank, China has also set the wheels in motion for AIIB, focusing on
financial support to boost regional infrastructure. AIIB was first
announced by Chinese president Xi Jinping before the Asia-Pacific
Economic Cooperation meeting in Indonesia in October 2013. AIIB is
expected to be funded by its members, also with initial capital of
$50 billion, though it is expected that China will fund half. China’s
finance minister, Lou Jiwei, told Xinhua news agency in early March
that they are working towards an inter-governmental memorandum of
understanding in the autumn. According to the US ambassador to the
Asian Development Bank (ADB), Robert Orr, the AIIB could be seen as a
response to China’s inability to increase its influence in leading
global and regional multilaterals, as well as a “political tool” to
challenge the ADB.

Justin Fong of China-based NGO Moving Mountains commented: “For
China, the scenario at hand is how to align its positions – not work
in competition – in forming a new BRICS Bank while at the same time
being a major sitting member with increasing leadership roles in the
World Bank and most other existing IFIs. At the same time, it is
seeking to improve the positions of its own national finance
institutions pursuing overseas investments. For China, pursuing
multiple inroads, all of which it seeks to strengthen, allows it to
maximise the number of stakes it can cover.”

Nepal in the spotlight
-----------------------
In early June China invited Nepal to join AIIB as a founding member.
While welcoming the gesture, according to Nepal government officials,
Nepal has proposed that there should be a grant element available, as
well as flexibility on the aid conditions. The memorandum of
understanding is expected to be signed by interested countries by end
October.

The World Bank has also announced its intention to further increase
its stake in the country’s hydropower sector, including pushing for
the private sector to take a leading role with funding from the
International Finance Corporation (IFC, the Bank’s private sector
arm). The Bank’s involvement in the country’s infrastructure has been
subject to civil society criticism, including a 2013 complaint to the
Bank’s accountability mechanism, the Inspection Panel, regarding a
power transmission line (see Observer Spring 2014, Winter 2013).

In mid May the Bank approved $84.6 million for the 37.6 MW Kabeli-A
hydroelectric project. This includes a $40 million loan and $6
million grant from the International Development Association (IDA,
the Bank’s low income country arm) and a $19.3 million loan from the
IFC. According to the Bank’s country director, Johannes Zutt, the
project “will demonstrate how public-private partnerships can help
Nepal exploit its hydropower potential.” According to the IFC, social
and environmental impacts of the project include “potential impacts
on four affected communities … [including] individuals belonging to
different groups recognised as indigenous”.

In December 2013 the IFC signed a joint development agreement with
India-based GMR Energy on the 600 MW Upper Marsyangdi 2 hydro project
in Nepal. According to the GMR Energy chairman GBS Raju, the IFC will
bring “its vast experience in financing large and complex
infrastructure projects”. In March media reported that the IFC was
again in talks with GMR Energy about acquiring a 10 per cent stake in
the 900 MW Upper Karnali hydro project. Some of the power supply is
expected to go for export, with March media reports that Bangladesh
has expressed an interest to buy 500 MW from Upper Marsyangdi 2 and
Upper Karnali – the IFC is expected to help broker the deal.
According to Ratan Bhandari of local NGO Jal Sarokar Manch, there is
widespread local opposition to the projects.


Problem projects: Pakistan
--------------------------
In early May, despite the US abstaining from voting, the Bank board
approved a $125 million equity investment by the IFC in China Three
Gorges South Asia Investment Limited (CSAIL), a renewable energy
investment holding company aiming to develop large hydropower
projects in Pakistan (see Bulletin Feb 2014). According to the US
statement “CSAIL does not have well-developed systems for managing
the [environmental] risks inherent in large energy sector projects,
particularly in the hydro sector.” The news site PakTribune reported
that the US had also threatened to abstain from voting on Bank
support to the Dasu hydropower project (see Bulletin Feb 2014) due to
“congressional constraints”, however, it was approved unanimously in
early June.

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TOPIC: ENVIRONMENT
Analysis


2.World Bank-funded mines threatening livelihoods

Abstract
Civil society groups criticise IFC investments worth hundreds of
millions of dollars in mining projects in Guinea, Mongolia and
Armenia for potential negative social and environment impact.

Summary
- IFC agrees new finance deal for Guinean iron ore mine.
- NGOs condemn Oyu Tolgoi mine in Mongolia for water and air
pollution
-Communities fear water pollution from new gold mine in Armenia

Mining companies Rio Tinto and Chinalco signed a deal in May with the
International Finance Corporation (IFC), the Bank’s private sector
arm, on a $20 billion investment framework providing legal and
financial backing to the Guinean Simandou mine project. The IFC holds
a 5 per cent stake in Simandou. The mining project has come under
strong criticism for potential environmental and human rights abuses
(see Bulletin Dec 2013).

In April, civil society groups, including Mongolia-based Oyu Tolgoi
Watch, wrote to the Bank’s board to express concerns that the “local
herding community is now worse off” as a result of the Oyu Tolgoi
mine, causing “serious air pollution, pasture loss and loss of access
to clean water, forcing herders to abandon their traditional
livelihoods”. The letter urged the Bank directors to delay
disbursement of the IFC’s $400 million loan until key actions have
been completed.

Armenian residents from two villages, with the support of nine local
NGOs, submitted a complaint to the Compliance Advisor Ombudsman
(CAO), the IFC’s accountability mechanism, in April in relation to
the IFC’s $1.2 million investment in the Amulsar gold mine operated
by Channel Islands-based Lydian International. The complainants say
the mine may lead to water pollution and negative impacts on red-
listed species, and claim it has already violated national laws and
the IFC’s performance standards. The CAO found the complaint eligible
and has begun an assessment.

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TOPIC: TRADE
News

Abstract/Summary

3. ICSID problems in the spotlight
In April, a letter from 303 civil society groups urged World Bank
president Jim Yong Kim to “review the role of the International
Centre for the Settlement of Investment Disputes (ICSID)” because
mining corporation “Pacific Rim is using ICSID to subvert a
democratic national debate over mining”. The company is asking for
$300 million, 2 per cent of El Salvador’s GDP (see Bulletin Dec
2013). George Kahale, an international lawyer, criticised ICSID as
“seriously flawed”.

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TOPIC: LAND
News

Abstract/summary
An IFC-linked Vietnamese rubber plantation company agreed to
temporarily suspend activities in three Cambodian plantations, but
activists urged the company to cease its activities in all
communities.

4. IFC-linked rubber firm project paused
In May, an International Finance Corporation (IFC) linked Vietnamese
rubber company operating in Cambodia agreed to suspend activities on
three plantations until November. A February complaint to the IFC’s
Compliance Advisor Ombudsman accused the company of harm to
communities and land grabbing (see Update 86). Eang Vuthy at NGO
Equitable Cambodia, one of the complainants, welcomed the decision,
but asked the company to cease activities in all 25 communities.

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TOPIC: INFRASTRUCTURE
Commentary

5. Tata Mundra: making a mockery of accountability
Comment by Bharat Patel, Machimar Adhikar Sangharsh Sangathan, and
Himanshu Damle, Bank Information Center, India

Abstract
IFC criticised for undermining social and environmental
accountability for Tata Mundra coal power plant in India, by ignoring
recommendations from its accountability mechanism.

In the 1990s, India pushed mega power projects (MPPs) to address the
power crisis. These were of 1,000 MW or more, and catered to more
than one state. When the MPP policy was falling short of fulfilling
India’s power crisis, all the government did was to add the prefix
‘ultra’, and came up with UMPPs. UMPPs were characterised by 4,000 MW
generating capacity, a colossal rise over the MPPs. The first
realisation was the Coastal Gujarat Power Limited (CGPL), a wholly
owned subsidiary of Tata Power Limited, in Mundra, Gujarat. Powered
by supercritical technology, this 4,000 MW plant has been in the news
for generating more controversies rather than power.

This $4.14 billion project is funded through external commercial
borrowings, with the International Finance Corporation (IFC, the
World Bank’s private sector arm) and the Asian Development Bank
pumping in $450 million each. The plant functions on imported coal
from Indonesia, and with changed coal export regulations in the
source country, generating electricity has become dearer, prompting
CGPL to approach the Central Electricity Regulations Commission
(CERC) to request a hike in tariff structures from the one initially
quoted that helped them win the contract in the first place.

As if this were not enough, something else propelled CGPL as a thorny
issue, attracting widespread global attention and condemnation, the
issue of the callousness of the IFC towards its own accountability
mechanism, the Compliance Advisor Ombudsman (CAO). Acting on a
complaint filed by Machimar Adhikar Sangharsh Sangathan (MASS), a
local organisation of around 25,000 affected people, the CAO started
an investigation in 2011 to verify alleged breaches of the IFC’s
social and environmental policies.

In October 2013, the CAO published its findings validating the claims
made by MASS of the IFC’s leniency in adequately assessing the
impacts on the seasonal fishing community, the majority of which
happen to be from a religious minority. This inadequacy excluded the
people from falling within the proper ambit of the IFC’s performance
standard on land acquisition.

The CAO observed: “IFC should have required that its client
commission additional E&S [environmental and social] assessment in
order to ensure compliance. … IFC did not pay adequate attention to
verifying whether pre-project consultation requirements were met. …
IFC failed to assure itself that directly affected fishing
communities were engaged in effective consultation. … IFC’s E&S
review regarding marine impact did not meet the due diligence
requirements set out in the sustainability policy. … IFC failed to
meet the requirements of the sustainability policy despite sufficient
indications of project-related displacement (both physical and
economic) as to require objective assessment. … IFC is unable to
demonstrate that its client’s monitoring is commensurate to risk.”

The IFC in its response to the CAO findings dismissed the report,
defending its client and justifying its investment. To add further
insult to injury, World Bank president Jim Yong Kim not only sat on
the CAO report for close to a month, but eventually acquitted the IFC
from any wrongdoing. This not only undermined the investigations of
the CAO, but also marginalised the issue of thousands of fisherfolk
and families who lost their means of livelihood.

To highlight this injustice, an intense concerted effort from civil
society organisations around the world has built up, culminating in a
petition signed by more than 24,000 people and presented at the World
Bank’s spring meeting in April. The petition demands urgent actions
to restore, rehabilitate and resettle, provide adequate compensation,
and that the IFC pull out of the project, acknowledges its lapses and
refuse to finance any expansion. So far the IFC has hinted that it
will not be financing the expansion.

As the CAO cannot recommend, only bring to light the IFC’s faults,
its report has not really changed the reality on the ground. Growing
activism against the Bank’s inaction has highlighted that the IFC’s
so-called action plan on Tata Mundra is a non-starter and ignores
precisely what it has been asked to rectify. The callous attitude of
the IFC and CGPL has made a mockery of the accountability mechanism,
and with the World Bank president shutting his eyes, those affected
have no recourse left. Their lives are getting darker by the day, and
whatever electricity produced at the plant at whatever loss, makes
nothing brighter for them.
Bharat Patel, Machimar Adhikar Sangharsh Sangathan, India
bharatp1977@gmail.com
masskutch.blogspot.com
Himanshu Damle, Bank Information Center, India
hdamle@bicusa.org

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TOPIC: CONDITIONALITY
Analysis

Abstract
The IMF’s provision of an exceptional access loan to Ukraine was
presented as vital economic support, but many commentators fear that
this loan is driven as much by political as economic necessity.
Despite emphasising increased sensitivity to country circumstances,
Fund policy recommendations in Egypt are very similar to its
prescriptions for Ukraine.

6. IMF: Ukraine’s “tough programme”; Egypt next?

Summary
- Ukraine enters third IMF programme since 2008, gains ‘exceptional
access’
- IMF-prescribed reform may give “unpleasant surprise” of low growth,
high social costs
- Egypt: IMF reiterates readiness to support new regime, policy
recommendations focus on energy subsidies, VAT increases

The era of IMF-led structural reform is not over, despite Fund
rhetoric on reducing inequality, country ownership and consideration
of the most vulnerable (see Observer Spring 2014). The IMF’s claimed
new approach to conditionality still results in a familiar austerity-
focussed framework for reform attached to emergency lending.
Additionally, the timing of lending decisions appears to be driven by
the political preferences of major shareholders.

In early May, the IMF announced that it had agreed to provide an $18
billion standby arrangement to Ukraine, supplying $3.2 billion
immediately, of which over one third is intended to pay outstanding
bills to Russian gas exporter, Gazprom. This represents 800 per cent
of Ukraine’s IMF quota, placing this programme under the Fund’s
exceptional access rules. Since the political instability, triggered
by the overthrow of the previous president in February, the IMF had
already committed in March to provide at least $14 billion, subject
to commitments from other lenders, including EU members and the US
(see Observer Spring 2014).

An editorial from news agency Bloomberg in late March warned of
problems stemming from the IMF attempting “an economic solution to a
geopolitical problem”, stating “shock therapy isn’t an option” (see
At Issue). The editorial reflects Ukraine’s troubled history with the
Fund. This is the third loan agreement since 2008, the previous two
having been suspended over the country’s unwillingness to implement
reforms to the IMF’s satisfaction. Now there appears to be little
option for the country’s interim administration, which began
implementing reforms before the loan announcement, including a 56 per
cent hike in energy prices in March.

Under the agreement, it must reverse value added tax (VAT) reductions
(back to 20 per cent) and VAT exemptions to the agricultural sector,
while providing for refunds to some businesses. The Ukrainian
currency was floated, leading to an immediate depreciation in its
value, increasing inflation and putting more pressure on households’
cost of living, exacerbated by the removal of key subsidies.


Inappropriate reforms?
--------------------------
There is widespread consensus that Ukraine’s economy is in need of
significant and painful reform. Olexi Pasyuk, of Eastern European NGO
network CEE Bankwatch said that Ukraine has been “stuck for many
years in the transition from planned to market economy, getting the
worst of both systems”. Pasyuk noted that “it is important to
mitigate negative impacts of price increases on the poorest, as is
stressed in the memorandum”, but that “this is going to be a
challenge”. The IMF’s approach to ensure that the most vulnerable are
protected will rely on an existing household assistance scheme, plus
a new programme, which has not yet been designed, intended to give
financial transfers to those excluded by the existing scheme.

Mark Weisbrot, of US-based think tank Center for Economic and Policy
Research, warned in a March commentary for news site Al Jazeera
America that Ukrainians may be in for an “unpleasant surprise” given
the IMF’s indications that Ukraine should brace itself for several
years of fiscal austerity, arguing that “you can’t destroy an economy
in order to save it”. US president Barack Obama administration’s
nominee for new IMF executive director, Mark Sobel, told a
Congressional committee in May to expect a “very tough programme”,
adding “we’re going to have to be very vigilant to make sure the
tough reforms that Ukraine needs … are implemented”.


Egypt: new money but an old programme?
--------------------------------------

In the wake of June’s Egyptian presidential elections, IMF managing
director Christine Lagarde personally congratulated the president-
elect, former general Abdel Fattah al-Sisi, and according to a Fund
spokesperson “reiterated the Fund’s continued commitment to help
Egypt and its people”. Discussions over a $4.8 billion loan programme
have occurred repeatedly since the overthrow of former president
Hosni Mubarak in 2011 (see Update 86), but were never finalised due
to continued political instability and widespread popular resistance
to the scale and burden of reforms (see Update 83).

As in Ukraine, Fund-recommended reforms have included reducing energy
subsidies and increases to VAT. Lagarde described reforms as a “must
... no matter who will be in charge” in the wake of private meetings
between Egyptian government officials and Lagarde at the IMF spring
meetings in April. Egyptian newspaper Al Ahram reported in early May
that VAT will be set to a flat rate of between 10 and 12 per cent,
while the energy subsidies required will be reduced to $23 billion
per year, leading to large increases in households’ energy costs.
Despite commitments to ensure cash transfer programmes protect the
most vulnerable, it is as yet unclear how or when this protection
will be enabled.

Reem Abdel Haliem from the NGO Egyptian Initiative for Personal
Rights argued that the issue of conditionality is “more complex than
it seems”, as conditionalities can “be framed to maintain the same
growth model that serves the rich rather than the poor”. Haliem noted
that, despite confusion surrounding the new administration’s
intentions, there are fears of “unfair taxation which burdens the
poor and low middle income groups”.

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TOPIC: FINANCE
News

7. Ghana under pressure: IMF loan feared

Abstract
Fierce debate in Ghana over whether to turn to the IMF for support,
as its economic growth and debt profile come under pressure. IMF
warns on risks to Ghana’s “transformation agenda” and whole region’s
debt levels and growth

Summary
- Ghana adopts IMF-approved policies, puts off Fund borrowing with $1
billion bond
- IMF warns Sub-Saharan Africa of rising debt risks as a threat to
growth

Ghana has long been held up as an economic success story relative to
its neighbours, but the prospect of the Ghanaian government turning
to the IMF for a lending programme has caused controversy.

In March, finance minister Seth Terkper, a former IMF staffer, said
“if it becomes necessary, we’ll fall on the Fund”. However,
parliamentary finance committee chair, James Avedzi, pointed out that
Fund programmes “come with a lot of conditionalities”, adding that
“we are already implementing” most of them, citing the removal of
subsidies on utilities and a planned freeze on public sector wage
increases this year. In early April the government announced public
sector cuts, amidst a tightening of monetary policy by the Bank of
Ghana. The government also announced an increase in the valued-added
tax rate and reduced exemptions.

The IMF said in its annual Article IV surveillance report, released
end May, that Ghana’s “transformation agenda” is at risk. The report
advocated that the government go further, with more “front-loaded
fiscal adjustment”, while endorsing the Bank of Ghana’s hawkish
stance.

In mid May, president John Mahama denied any immediate intention of
turning to the Fund. The secretary general of the Trades Union
Congress in Ghana, Kofi Asamoah, responded that “IMF policies and
guidance have never worked  … they will come with the kind of
conditionalities, which will eventually worsen the situation”. In
late May Ghana announced that it had hired a group of banks to advise
it on the issuance of a $1 billion bond to offset its fiscal
difficulties, which suggests that there is no immediate intention of
turning to the Fund.


Rising risks to Sub-Saharan Africa
----------------------------------
IMF managing director Christine Lagarde, speaking to African finance
ministers at the Africa Rising conference in Mozambique in late May,
cautioned that governments should be more “attentive” and not risk
“overloading the countries with too much debt”, as it represented
“additional vulnerability”. The IMF’s April regional outlook warned
that Sub-Saharan African countries face risks from large fiscal
deficits despite accelerating growth.

Tirivangani Mutazu of Zimbabwe-based NGO network Afrodad said “IMF
conditionalities threaten the political and social stability of
Ghana. With high poverty levels, unemployment and sluggish industrial
growth, the government ... should seriously weigh its policy options
against an IMF bailout.”

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TOPIC: PRIVATE SECTOR
News

8. Big banks & IMF: No structural reform

Abstract
The IMF rings more warnings about the costs of having an oversized
financial sector, but fails to recommend stronger controls on the
banking sector.

Summary
- Fund estimates up to $500 billion implicit subsidies given to rich
country banks
- IMF identifies social welfare costs, but avoids recommending
structural reforms

This spring the IMF has published several reports on financial
regulation, but little has been accomplished. In late May, the Fund’s
managing director, Christine Lagarde, said: “A big gap is that the
too-big-to-fail problem has not yet been solved. … Banks are still
major sources of systemic risk.” However, the Fund has ignored
demands for deeper changes in financial systems (see Update 82).

The late March Global Financial Stability Report (GFSR) estimated the
implicit subsidies given to the largest banks in 2012. The Fund
analysis found it highest in the eurozone (up to $300 billion),
followed by Japan and the UK (up to $110 billion each) and lower in
the US due to tightened regulations (up to $70 billion). It concluded
that “the expected probability that [systemically important banks]
will be bailed out remains high in all regions”. The GFSR argued for
greater international cooperation, because “solo initiatives, even
though individually justifiable, could add unnecessary complexity …
and encourage new forms of regulatory arbitrage.” It also expressed a
preference for regulators to enhance capital requirements and
implement financial stability taxes based on banks’ liabilities (see
Update 71).

In early May, the IMF published a staff discussion note on bank size,
which does not represent the IMF’s official view. It argued that
governments need to implement stronger systemic regulation because
“traditional bank regulation, which focusses on individual bank risk,
may be insufficient for large banks.” While the staff paper found
that “some banks operate at a scale that is too large from a social
welfare perspective”, the Fund has not argued for structural reforms
for banks, such as limits on bank size or scope.

“The size and interconnectedness of too-big-to-fail banks is a
serious challenge”, said Greg Ford of Brussels-based NGO Finance
Watch. “That is why structural reform of banks is the most important
among the various measures proposed to tackle too-big-to-fail, as it
can tackle the problem at source: the separation of trading from
credit would reduce the funding subsidies that help banks become too
big and too interconnected to fail in the first place.”

=====================================================================

TOPIC:  IFI GOVERNANCE
Background

In response to the IFC’s shaming over its involvement with Dinant
corporation in Honduras, the institution produced a “lessons learned”
document. However, it has been rejected by campaigners, who are
demanding more fundamental reform.
9. IMF publications

Abstract/Summary

Every year the IMF produces numerous publications, however, there is
ambiguity concerning the extent Fund documents are representative of
the IMF’s institutional views or dictate how the IMF is supposed to
execute policy.

Every year, the IMF produces numerous publications. In 2013, it
released 805 publications on its website. These include economic
research and policy analyses, forecasts, country monitoring and
internal policy and strategy papers. There is often confusion
concerning the extent to which research, policy and surveillance
papers are representative of the IMF’s institutional views.

The IMF assigns different categories to its published documents. Each
category reflects different publication processes and varying
involvement of other IMF staff in the document’s development.
Approval for publication may be by IMF staff or by the IMF's board of
executive directors and managers, with implications for whether the
document is intended to represent the IMF. Disclaimers are included
to indicate when a paper cannot be regarded as representing the views
of the IMF.

The multiple types of publications reflect the IMF’s differing roles.
Policy documents are sent to the board for consideration, and are
intended to inform IMF policy. Surveillance papers may represent the
IMF’s institutional view, and are intended to fulfill the IMF’s
obligation to monitor risks to nations and the international economy.
Research papers are intended for a wide audience and do not represent
the institution’s views.

Surveillance is one of the IMF’s three key pillars of activity. Under
Article IV, “the IMF is charged with (i) overseeing the international
monetary system to ensure its effective operation, and (ii)
monitoring each of its 188 members' compliance with its policy
obligations.” Surveillance acts as a means through which the IMF
seeks to highlight potential risks to economic stability and
forecasts future economic activity, including growth. Article IV
reports, mandatory annual monitoring reports written by Fund staff
about each member country, and financial sector sustainability
analyses are the only surveillance papers intended to represent the
views of the board and which therefore require prior board approval.
Conversely, other surveillance outputs including the World Economic
Outlook and Spillover reports represent views of the staff only. They
are published with disclaimers indicating they do not reflect the
views of executive directors nor of their respective countries, and
do not constitute official IMF policy.

Policy papers intended for board discussion and for policy-making may
be discussed in informal session by the IMF board, in which case this
is stated clearly, or formally whereby a decision is taken and the
board releases an accompanying press release and usually a summing up
of the board’s views. Informal discussion by the board of a policy
paper occurred recently for the policy paper on the relationship of
fiscal policy and income inequality (see Observer Spring 2014). This
caused confusion as to what the IMF position on this question was
despite a disclaimer indicating that it was discussed by the board
only in “informal session and no decisions were taken at this
meeting”. It went on to state “The policy considerations in this
paper should be attributed to IMF staff and not to the IMF or its
executive board.” As such, papers with findings that appear to have
far-reaching consequences for IMF policy making may, in reality, have
none.

Research papers are not intended to be discussed by the board.
However, there is a hierarchy of effort and staff involvement in
different types of papers. Working papers, though subject to internal
review and approval by more senior staff before publication, are
always indicated as being the views of the author. Departmental and
occasional papers, as well as staff discussion notes (SDNs), receive
considerably more input from staff though these are also not
representing the institution’s views. As such, the extent to which
there is tacit endorsement or input from management is far greater
for SDNs, occasional and departmental papers than for working papers.

=====================================================================

TOPIC: PRIVATE SECTOR
Analysis

10. IFC: Learning lessons or institutional amnesia?

Summary
- IFC publishes “lessons learned” briefing in the wake of major
criticism over impacts
- It omits formal targets, benchmarks, follow-up procedures
- NGOs criticise neglect of institutional culture, incentives and
human rights

The International Finance Corporation (IFC, the Bank’s private sector
arm) published an early April briefing for the Bank’s executive board
on “IFC’s environmental and social lessons learned”. The briefing was
developed in response to the controversy over the IFC’s investment in
Dinant, a palm oil company alleged to have sponsored murders and
other human rights abuses in Honduras (see Bulletin May 2014,
Observer Summer 2014, Winter 2014). It is the most comprehensive
admission of fault by the IFC ever made public. The briefing follows
numerous IFC failures and bad publicity over damages to communities
and the environment (see Observer Spring 2014, Update 86) as well as
criticisms of its lack of poverty focus (see Update 84).

The briefing argued that despite the eight year old IFC performance
standards, “clients and IFC are still learning, [the] implementation
record [is] mixed”. It presents six categories where lessons were
said to have been learned and IFC responses implemented:
understanding the broader context, stakeholder engagement, land and
water issues, supply chains, labour and financial intermediaries. It
highlighted many implementation challenges, focussing on external
obstacles rather than the IFC’s own systems, including “weak client
capacity combined with weak regulatory implementation”, “varying
client commitment” and the “resource implications” of increased
oversight.

A separate early April presentation, given to civil society
organisations during the IFC’s spring meetings, more clearly
identified the projects that have resulted in these lessons. However,
neither briefing contains any formal targets, benchmarks, or follow-
up procedures for how the IFC will improve its performance.

NGOs criticise “serious omissions”
----------------------------------
Civil society organisations were on balance unimpressed with the
IFC’s efforts. A June letter to the IFC and the Bank’s board, signed
by 25 groups, including Indonesian NGO Solidaritas Perempuan and
Oxfam International, welcomed positive elements in the briefing, but
argued “this exercise will not produce the changes needed to avoid
future harm to communities and the environment from IFC investments.
This concern arises from … a number of serious omissions in the
content of the lessons learned document; and a lack of clarity about
the future process of how these lessons will be followed through, to
implementation, as well as monitoring and evaluation.”

The letter argued that the lessons learned document fails to address
institutional culture and incentives, the miscategorisation of risk
and the need to prioritise human rights, among other issues. The
signatories found “a degree of institutional amnesia each time things
go wrong”, and called for “a public commitment to a time bound plan
for the lessons learned exercise”, which should include benchmarks,
consultation, proposals for sanctions and risk re-assessment of the
current portfolio. Finally, the letter demanded “proposals on how new
requirements will be built into project appraisals to ensure that IFC
only invests in projects and sub-projects with a genuine poverty
reduction rationale based on local and national sustainable
development priorities.”

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TOPIC: NOWLEDGE
Analysis

11. Business as usual: World Bank rejects Doing Business reforms

Abstract
World Bank publishes minor changes to its Doing Business report,
addressing only one of the criticisms of an independent panel review
while activists continue to highlight the damage done by the
rankings.

- Bank sets out methodological changes to controversial Doing
Business Report (DBR)
- NGO analysis shows that the Bank has ignored most of the
recommendations of a 2013 independent review
- Activists continue to highlight the damage done by DBR

The World Bank has announced minor changes to its heavily criticised
Doing Business Report (DBR), an annual report of business regulations
in 189 economies. Following forceful recommendations for a change of
approach in June 2013 by an independent panel reviewing DBR (see
Update 86), in late April the Bank revealed “exciting new methodology
updates” to the rankings. The process is being led by Bank vice
president and chief economist Kaushik Basu. The Bank announced that a
second city will be included for 11 sample economies from 2015, as
well as a revised ranking calculation. According to the Bank, this
will “give credit to governments that are reforming but not yet
seeing changes in rankings.”

However, the revised rankings are a long way from the panel’s
recommendations, which included scrapping the aggregate rankings and
introducing peer review. In June, Brussels-based NGO network Eurodad
produced an analysis of the methodological changes, showing that only
one of the panel’s seven main recommendations – to regularly review
the rankings – had been implemented, which “raises questions about
why the World Bank engaged in the review in the first place.”

A January paper, published by US thinktank the Brookings Institution,
busts the “myth” that “if only stroke-of-the-pen reforms such as
reducing the time and cost of opening a business were pursued with
vigour, Africa’s economies would be transformed”. In an April article
for international news channel Al Jazeera’s website, Jason Hickel,
lecturer at the London School of Economics denounced DBR’s “pro-
corporate ideology” and condemned its attempt “to get countries to
impose neoliberalism on themselves.”

Activists from countries penalised by the rankings’ have highlighted
their weakness. In May, Maurenn Penjueli, coordinator of the Pacific
Network on Globalisation, said “the World Bank’s Doing Business
rankings is a key means to our governments’ formal policies of
freeing up land and so what we are seeing now is that it is opened up
for [a] resource grab.”

=====================================================================

TOPIC: SOCIAL SERVICES
Analysis
12. Reproductive health: What’s the Bank’s score? Guest analysis by
Preethi Sundaram, International Planned Parenthood Federation

Abstract
The Bank has produced mixed results on reproductive health; it is
imperative that as the post 2015 agenda is set, it maintains the
funding and political profile of this hugely impactful public health
issue.

Summary
- IPPF’s scorecard rates the Bank’s record on reproductive health as
mixed, as financing levels have fallen 2012-2013
- Bank needs to make strong policy commitments in its forthcoming
Health Nutrition and Population strategy and post-2015 work
- Critical role for Bank in ensuring global governments prioritise
family planning investment

There are currently 222 million women around the world who have an
unmet need for family planning; women who don’t want any more
children, or want to delay the birth of their next child and are not
using any method of contraception.

If the global community were able to meet the needs of all women in
developing countries who currently have an unmet need for modern
methods of contraception, the benefits would be huge. It would
prevent an additional 54 million unintended pregnancies, 16 million
unsafe abortions and 7 million miscarriages, 79,000 maternal deaths
and 1.1 million infant deaths.

The World Bank launched its Reproductive Health Action Plan in 2010,
aiming to reduce high fertility, improve pregnancy outcomes and
reduce sexually transmitted infections, including HIV. It focuses on
57 low-income countries (LICs) with high maternal mortality and high
fertility and sets out a broad results framework to provide guidance
so targeted country level action plans can be developed.

The International Planned Parenthood Federation (IPPF) has assessed
the plan’s impact through a scorecard and found mixed results from
the Bank. Between 2010 and 2012, the Bank’s financing for
reproductive health showed an upward trend. However, the proportion
of the health portfolio budget allocated to reproductive health fell
from 24 per cent in 2012 to 7 per cent in 2013.

Unless the Bank increases its new commitments to reproductive health
leading up to 2015 and beyond, there is a risk of seeing a downward
trend in the Bank’s funding for reproductive health. This is of
concern, as a continued investment in reproductive health is
essential to deliver on Millennium Development Goal 5 (improving
maternal health) and for the future sustainable development goals. It
is important to make sure that Bank funding for reproductive health –
particularly grants for LICs – is on an upward trend. Bank funding
often comes in the form of loans that eventually have to be paid back
through internally generated resources, taking money away from
government budgets and perpetuating cycles of debt for recipient
countries. For a start, the Bank’s forthcoming Health Nutrition and
Population (HNP) strategy must place sexual and reproductive health
and rights at its core.


Recognising rights
-------------------
Focussing exclusively on the Bank’s investments does not tell the
full story. Making sure that governments prioritise investment in
family planning within their own national budgets is critical. Family
planning is one of the most cost effective health and development
interventions; for every $1 invested in family planning $31 in
additional public service and health expenditure is saved. Total
demand for family planning is projected to increase to more than 900
million married women by 2015.

The current process of negotiating the post-2015 framework provides
an opportunity for reproductive health to be prioritised at the
national and global levels and the Bank is uniquely placed to
champion it.
As global discussions evolve, Universal Health Coverage (UHC), the
idea that all people can access the health services they need without
suffering financial hardship, is being championed by Bank president
Jim Yong Kim and by the World Health Organisation, for inclusion in
the post-2015 framework.

How UHC will translate into services and how it will be monitored
remains to be seen. If the end goal is to improve health outcomes, it
is critical that sexual and reproductive health services are included
explicitly within the essential package of services under UHC.

The Bank’s recently launched report, Voice and agency: empowering
women and girls for shared prosperity  identifies that sexual and
reproductive health remains a significant constraint for women. It is
critical that the Bank mainstreams sexual and reproductive health and
rights across both its gender and health divisions, and its work at
large. As the World Bank reviews its safeguards policies, it is
important that a robust gender safeguard policy is established which
mitigates against any adverse impact of Bank funded projects on
individuals’ sexual and reproductive health and rights.

Sexual and reproductive health and rights are important ends in
themselves but they also bring broader benefits to the health,
sustainability and well-being of communities.  As the Bank’s
Reproductive Health Action Plan comes to an end in 2015, the same
year as the next development framework will be established, there are
opportunities for the Bank to renew its commitments on reproductive
health.
Preethi Sundaram,  International Planned Parenthood Federation
PSundaram@ippf.org
ippf.org

=====================================================================

TOPIC: Environment
Analysis
13. World Bank forests projects under fire

Abstract
World Bank continues to strongly back REDD+ forest projects, which
have been criticised for not consulting indigenous peoples and not
respecting land rights.

Summary
- Bank pushing for REDD+ initiatives through Forest Carbon
Partnership Facility and Forest Investment Program
- Approval of REDD+ concept note in Democratic Republic of Congo
criticised
- Indonesian communities protest lack of consultation on FIP projects

The World Bank continues to play a prominent role in promoting
initiatives to reduce emissions from deforestation and forest
degradation (REDD+), which it sees as a key policy in global efforts
to tackle climate change despite repeated criticism by civil society
groups. The March Palangka Raya declaration, signed by Indonesia
indigenous communities and international groups, including US-based
Rainforest Action Network, criticised the Bank and UN-REDD for
“promoting the take-over of our peoples’ land and territories through
their support for imposed development schemes”.

In December 2013 the Forest Carbon Partnership Facility (FCPF)
methodological framework was approved, releasing $390 million to be
used for pilot REDD+ forest conservation projects in developing
countries (see Observer Winter 2014). The FCPF is a trust fund housed
at the Bank.

In early April the FCPF’s Carbon Fund, which pilots payments for
verified emissions reductions from REDD+ programmes, provisionally
approved the emission reductions programme idea note for the
Democratic Republic of Congo (DRC). The approval means a REDD+
programme, covering millions of hectares of forests, will be part of
the FCPF Carbon Fund’s pipeline. The DRC will now be able to access
$650,000 to develop a final programme proposal that could be worth up
to $60 million.

UK NGOs Forest Peoples Programme (FPP) and FERN criticised the
approval in April, saying it “lacks a clear commitment to
communities’ tenure rights, and is based on flawed deforestation
assessments – which blame communities for forest destruction – and
has defective plans for land use zoning, alternative livelihoods and
actions to limit local subsistence activities.” They concluded:
“unless major changes are made in FCPF planning, design and
validation of emissions reduction programmes the FCPF Carbon Fund
risks enabling pilots with negative impacts on indigenous peoples and
local communities.”

Nepal’s proposal, covering around 1 million hectares of forests, was
also accepted by the FCPF’s Carbon Fund in April for the preparation
of a final programme proposal that could be worth up to $70 million.
Indigenous peoples in Nepal have repeatedly called for meaningful
consultation on REDD+ projects. Dinesh Kumar Ghale of the Lawyers’
Association for Human Rights of Nepalese Indigenous Peoples told
Nepalese newspaper República in May, “we doubt the World Bank and its
promoters are concerned about the rights of indigenous people who
rely on the forests.”


Controversy in Indonesia
-------------------------
The Bank also houses the Forest Investment Programme (FIP), a Climate
Investment Fund aimed at assisting countries to reach their goals
under REDD+ (see CIFs Monitor 9). Civil society groups have
consistently protested against the lack of consultation for the $70
million FIP investment plan in Indonesia, endorsed in November 2012.
In a June letter over 50 Indonesian and international organisations
wrote to the International Finance Corporation (IFC), the Bank’s
private sector arm, to criticise the “lack of meaningful
consultation” and the “violation of FIP safeguards which forbid FIP
support for industrial logging” in reference to a proposed IFC
project in an area of up to 700,000 hectares.

Palangka Raya declaration

=====================================================================

TOPIC: FINANCE
NEWS

14.Argentina’s creditors “vulture-like behaviour”

Abstract/Summary
Argentina has agreed a deal with its Paris Club creditors, which have
been accused of aggressive behaviour in demanding repayment of double
the original debt.

In May, Argentina reached an agreement with the Paris Club, a group
of rich country creditors, to begin repaying debt of up to $9.7
billion that Argentina defaulted on during its 2001 economic crisis
(see Update 26). Jorge Gaggero from the University of Buenos Aires
emphasised that the “exclusion of the IMF” from the Paris Club deal
means “the absence of perverse policy conditionalities and
supervision.” Civil society groups criticised the repayment amount,
double the original debt. Tim Jones of UK-based NGO Jubilee Debt
Campaign said: “Rich countries have condemned the profiteering of so-
called vulture funds in debt crises around the world, but this is
vulture-like behaviour from the Paris Club themselves.”

=====================================================================

TOPIC: RIGHTS
news

Abstract
Argentina has agreed a deal with its Paris Club creditors, which have
been accused of aggressive behaviour in demanding repayment of double
the original debt.

15. Further delays for Bank safeguards review
The first draft of a new safeguards framework is now scheduled for a
World Bank executive board subcommittee meeting at end July at the
earliest. The delay stems from dissatisfaction within the Bank on
initial drafts, leading to mid June vice presidential level meetings
on contentious issues, such as labour and human rights. The Bank on
Human Rights NGO coalition called for the inclusion of human rights
due diligence in a mid May letter to the Bank. A late May statement
from the Asia Indigenous Peoples’ Pact called for the safeguards to
include free, prior and informed consent of indigenous people.

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