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Bretton Woods Observer Winter 2016
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.  Debt bubbles “popping” in emerging economies
    (CONDITIONALITY/Analysis)
2.  World Bank Uganda road project cancelled (INFRASTRUCTURE/News)
3.  World Bank call for hydropower to combat climate change
    challenged (INFRASTRUCTURE/News)
4.  A critical juncture for forests: Will the World Bank rise to meet
    the global challenge?
    by Beatriz Zavariz and Paulina Deschamps, Mexico, and Rachel
    Baker, Bank Information Center, US (ENVIRONMENT/Commentary)
5.  IMF rule-change sustains lending to Ukraine(CONDITIONALITY/News)
6.  IMF to add China’s currency to SDR basket (CONDITIONALITY/News)
7.  IMF governance: one step forward, one step back (IFI
    GOVERNANCE/Analysis)
8.  The World Bank’s country engagement model
    (ACCOUNTABILITY/Background)
9.  World Bank safeguards: “human rights-free zone” (RIGHTS/News)
10. World Bank releases new gender strategy (RIGHTS/News)
11. Where’s the remedy? Development banks must do more to remedy harm
    caused by activities they finance
    Guest analysis by Kris Genovese, Centre for Research on
    Multinational Corporations (SOMO)(IFI GOVERNANCE/Analysis)
12. IMF contemplates returning to Greece ... again (FINANCE/Analysis)
13. New report on the IMF in the MENA region(CONDITIONALITY/News)
14. Emma Bürgisser & Roosje Saalbrink join Bretton Woods Project


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

TOPIC:CONDITIONALITY
Analysis

1. Debt bubbles “popping” in emerging economies

Abstract
IMF and World Bank face up to slowing global economy, but downplay
risks of new debt crises for low income countries

Summary
- Fears of new debt crises in developing countries
- IMF downgrades growth forecasts again
- Low-income African states vulnerable

Global economic instability has highlighted the vulnerability of
developing countries to renewed economic turbulence and even the
potential for new debt crises, in particular in sub-Saharan Africa.
During the summer of 2015 China’s stock market began to falter; in
January these problems recurred. Adding to the challenges for
developing economies, the US began to raise its interest rates in
December, triggering capital flows out of emerging markets at record
rates. According to economist Martin Wolf writing in the Financial
Times newspaper in January, “another set of credit bubbles … in
emerging economies is loudly popping”.

Gloomy forecasts, fears of “domino effect”
------------------------------------------

The IMF and World Bank issued January economic analyses which
significantly downgraded their previous expectations. The World
Bank’s Global Economic Prospects report found that growth in
developing countries reached a post-crisis low of 4.2 per cent in
2015, and that in sub-Saharan Africa it slowed to 3.4 per cent in
2015. It found that over $52 billion was removed from developing
countries’ financial markets in the third quarter of 2015, the
largest quarterly outflow on record. The IMF released its January
update to the World Economic Outlook (WEO), downgrading its own
previous forecasts for economic growth. IMF managing director
Christine Lagarde told German business daily Handelsblatt in December
that growth prospects were “disappointing and uneven”. Lagarde
cautioned that the US’ interest rate rise would also lead to higher
debt costs for many developing countries. The update advocated that
“policymakers in emerging market and developing economies need to
press on with structural reforms ”. The Fund concluded that for “a
number of commodity exporters, reducing public expenditures” is
necessary, also advocating for “exchange rate flexibility” to cushion
the impact of further shocks.

However, the International Labour Organization (ILO) had warned in an
October policy brief that the “new adjustment shock” to come in 2016
was not simply driven by inevitable global economic dynamics, but by
policy choices to cut budgets and spending “excessively”. They warned
that such policies in this climate would mean that developing
countries would be “most severely affected”, with Sub-Saharan Africa
and the Middle East and North Africa regions to be “hardest hit”.
This vulnerability would come from premature reductions in subsidies
on “fuel, electricity, food and agriculture” that were going to
impact predominantly the poorest and most vulnerable. The IMF
addresses such concerns by advocating pro-poorest social
interventions, however the ILO cautioned that targeting the very
poorest “risks excluding large segments of the vulnerable and low
income households”.

A December IMF policy paper acknowledged that developing countries
“faced increasing debt vulnerability in the last two years”. The
report examined the public debt of 74 low-income countries (LICs).
Despite the concerns set out by the ILO over excessively cautious
policies, two of the paper’s authors advocated in a January blog for
“fiscal prudence [and] improved debt management.” They argued that
countries should still focus upon the “need to strengthen their
fiscal frameworks … and reduce their debt”.

The Trade Union Advisory Committee to the OECD (TUAC) published a
briefing to coincide with the January World Economic Forum
questioning whether global policymakers appreciated the risk of
global stagnation, despite their own studies’ findings. The briefing
warned of a potential “domino effect” in developing countries in
2016.

“Boom in lending to most impoverished”
--------------------------------------

UK NGO Jubilee Debt Campaign (JDC) had warned in a July report that
global debt levels were rising and that 22 LICs were “already in debt
crisis” and a further 71 were at risk due to a “boom in lending to
the most impoverished countries” (see Observer Autumn 2015). As the
Chinese economy slows, the period of high commodity prices has ended,
driving growing debt risks of many commodity exporting countries,
such as Ghana which turned to the IMF for a loan in late 2015. Crude
oil fell from a price of $100 per barrel in September 2014 to below
$30 in January. A follow-up blog by JDC in December pointed out that
developing countries’ increased borrowing was primarily from new
loans. 60 per cent of the increase had come from multilateral
institutions, half of that from the World Bank alone.

UK daily The Guardian reported in January that Africa’s oil-producing
and metal-rich giants now find themselves facing a dangerous mix of
lower export revenues, depreciating currencies, declining financial
flows from China, falling domestic demand and higher debt costs
following last month’s US interest rate rise. Kenya-based commodity
trader, Aly Khan Satchu, told The Guardian that “in Zambia, the
currency has pretty much collapsed”, adding that many commodity
producing states in Africa “have tipped over the edge because they
are going to find it very expensive to borrow international money”.

Financial newspaper the Wall Street Journal highlighted the risks to
African commodity exporting countries in a January report. It pointed
out that South Africa’s rand had lost 26 per cent of its value
against the US dollar in six months from June 2015, and reached a new
record low in January. Though Nigeria had “ratcheted up efforts” to
sustain a currency peg, Lagarde – visiting the country at the time –
advised against this, saying “exchange rate flexibility … can help
soften the impact of external shocks”. However, the article revealed
that “accelerating currency declines across Africa are starting to
feed through to the real economy” and found that “mining companies in
Zambia have laid off thousands of workers”.

tinyurl.com/IMFwarning
tinyurl.com/IMFdebtLICs

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TOPIC:INFRASTRUCTURE
News

2. World Bank Uganda road project cancelled

In September a complaint from 58 community members concerning the
World Bank-funded Uganda Transport Sector Development project for a
66 km section of road in Kamwenge was registered by the Inspection
Panel (IPN), the World Bank’s accountability mechanism. The complaint
includes allegations of “underage sex and teenage pregnancy caused by
road workers … sexual harassment of female employees … child labour
[and] inadequate resettlement practices.” An earlier complaint to IPN
in December 2014 was not registered to allow the Bank to address the
complaints. In December 2015, the Bank cancelled the funding for the
project due to “the serious nature of the allegations.”

tinyurl.com/IPNUganda

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

TOPIC: INFRASTRUCTURE
News

3. World Bank call for hydropower to combat climate change challenged

Abstract
Calls by the World Bank for hydropower to play a major role in
efforts to strengthen resilience to climate change have been
challenged by civil society organisations and recent research.

Summary
- World Bank report promotes hydropower to strengthen climate
  resilience in Africa
- Academic research identifies hydropower as major threat to
  biodiversity
- CSOs call hydropower false solution to climate change

A November Bank report outlined the Bank’s strategy for contributing
to climate change adaptation efforts in Africa. This included
promoting hydropower as “a clean, large-scale, and affordable source
of renewable energy”. However, the report also acknowledged that
hydropower indirectly contributes to greenhouse gas emissions during
the construction phase and through the flooding of reservoirs.

The report raised concerns about revenue losses and increased energy
costs for consumers if climate change impacts are not integrated into
project planning and design. These concerns were previously explored
in an April 2015 Bank report examining how to enhance the climate
resilience of Africa’s infrastructure, which cautioned that dams
under construction in Africa are being designed based on historical
climate trends, rather than future projections where “the range of
uncertainty ... has tended to increase over time”.

The April report singled out the Congo river basin as being less
sensitive to climate change than other major river basins in Africa,
implicitly endorsing the much-criticised current and planned Inga
hydropower plants located in the basin (see Observer Spring 2015).
However, academic research presented in a January article in Science
magazine identified hydropower as a major threat to biodiversity and
listed the Congo river as one of three river basins in the world that
“contain a disproportionate amount of the world’s freshwater
biodiversity”. The article noted that hydropower plants can damage
fish populations and threaten food security for local population, but
that economic projections “frequently exclude or underestimate the
costs of environmental mitigation”.

An early December civil society organisation (CSO) statement
criticised the Bank and other institutions’ support for large
hydropower, calling them “a false solution to climate change”. The
statement, signed by 500 CSOs from 85 countries, including Togo-based
Jeunes Volontaires pour l’Environnement International, listed ten
reasons why climate initiatives should not include hydropower
projects, including disruptions of river flows. Astrid Puentes of the
Interamerican Association for Environmental Defense (AIDA) said: “The
countries of the global South should leapfrog obsolete dam projects
and promote energy solutions that are gentle to our climate, our
environment and the people that depend
on it.”

tinyurl.com/CSOHydroClimateStatement

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TOPIC: ENVIRONMENT
Commentary

4. A critical juncture for forests: Will the World Bank rise to meet
   the global challenge?
   by Beatriz Zavariz and Paulina Deschamps, Mexico, and Rachel
   Baker, Bank Information Center, US

Abstract
World Bank is called to take a leadership role in reducing
deforestation and promote community forest management, including
through its new Forest Action Plan.

2015 was a landmark year for forests. The importance of forests was
formally recognised in the December 2015 Paris Agreement of the UN
Framework Convention on Climate Change Conference of the Parties
(COP) 21, as nearly all tropical forest countries included forests in
their national climate change commitments. Moreover, new research
validated the critical role forests play in climate change.

The World Bank is faced with a watershed moment. Will the Bank step
up and take a leadership role in reducing deforestation and enhancing
the livelihoods of forest dependent peoples? Or will it continue to
primarily promote an agenda of deforestation as a byproduct of
development finance in other sectors? Investing in sustainable forest
management by local communities is a powerful tool to reduce poverty
and enhance local livelihoods. Challenges must still be overcome in
order to ensure and maximise the significant social and economic
potential of forests.

The World Bank’s engagement in the forest sector has made positive
contributions to the promotion of community forest management in some
countries, most notably in Mexico, where the Bank promotes community
forest management and the establishment of community-led enterprises
in forested regions. Over half of the Mexico’s forests are owned and
controlled by rural communities, which has resulted in significant
lessons regarding social organisation and collective action on
resource management. During the 1990s and 2000s, federal policies
supported and financed by a World Bank project recognised the
importance of the forest sector and the role of communities as
partners of sustainable development. The Bank’s financing has played
a major role in strengthening community forest management and
triggering local development based on tailored approaches. Three
decades later, the Bank’s engagement in Mexico’s forest sector
continues through the Forests and Climate Change Project, which
promotes community forest management and the establishment of
community-led enterprises in Mexican forested regions.

Although Bank investment in the forest sector has by no means been as
positive or successful in other countries, such as the Bank’s highly
problematic policy lending in the Democratic Republic of Congo’s
forest sector (see Observer Spring 2015), the case of Mexico
demonstrates the Bank’s potential to be a positive force in national
conservation and poverty alleviation through strategic, long-term
engagement in the forest sector, focused on community forestry.

Currently the Bank’s work in the forest sector is highly
marginalised. With insufficient staffing and budget, lack of forest
expertise on most project teams, and insufficient recognition of the
link between forests and poverty, the Bank is ill-prepared to attract
and provide much needed national investment in forests. The World
Bank’s Forest Action Plan (FAP), currently under internal review,
could be a timely vehicle for the introduction of a progressive
agenda and ambitious goals for the Bank’s forest portfolio. The
structure of the FAP, as presented by the Bank to civil society
organisations in November, appears to be on the right track. However,
in light of the lack of details of the FAP’s content, it remains
impossible to assess the document’s merit and potential impact.

To truly play a leading role in addressing the global forest loss
crisis the Bank must take strong action in two areas: firstly by
supporting investments which create an enabling environment for
forest conservation and management, such as community forestry, land
tenure reform, and forest governance; and secondly, halting
deforestation and degradation resulting from operations in sectors
that drive deforestation, such as energy and mining, transportation
and agriculture. A June review by the Bank Information Center of the
World Bank’s portfolio in 13 key tropical forest countries
demonstrated that the International Bank of Reconstruction and
Development (IBRD, the Bank’s middle income lending arm) and the
International Development Association (IDA, the Bank’s low income
lending arm) invested $106 billion in transportation, energy &
mining, and agriculture from 2008 to 2014, compared to only $2.9
billion in forests.

The World Bank and other international financial institutions are
rapidly falling behind the many private sector and government actors
which have made commitments to zero deforestation and deforestation-
free supply chains. In a December letter to the Bank, a coalition of
17 NGOs and five individual, academic, and private sector signatories
urged the World Bank Group to commit to zero finance of deforestation
and to the provision of finance for community forest management and
forest conservation.

We call upon the Bank to commit to forest conservation and management
and to the enhancement of forest peoples’ rights to their forests.
Through such efforts, the Bank could replicate its positive role in
Mexico’s successful experience with community-based forest management
globally.

Beatriz Zavariz
bzavariz@gmail.com

Paulina Deschamps
paulina.deschamps@gmail.com

Rachel Baker, Bank Information Center
rbaker@bankinformationcenter.org
bankinformationcenter.org

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

TOPIC: CONDITIONALITY
News

5. IMF rule-change sustains lending to Ukraine

Abstract
The IMF has changed its long-standing rule on lending to countries in
arrears to official creditors, thereby avoiding having to cancel its
$17.5 billion loan programme to Ukraine.

Summary
- IMF changes rule on lending to states in arrears to official
  creditors
- Russia to file court proceedings over $3 billion Ukraine debt

In late 2015, the IMF’s $17.5 billion loan programme with Ukraine
came under threat as it appeared the IMF’s “non-toleration of arrears
to official creditors” was about to be triggered. The long-standing
rule forbade the IMF from lending to countries in default for their
debts to ‘official’ or sovereign creditors. In mid-December, Ukraine
failed to meet its final payment of a $3 billion debt to Russia’s
Gazprom, causing Ukraine to be in default. Though Ukraine had
contested the debt’s status as official, in December the IMF
executive board recognised Russia as an ‘official creditor’. As a
result, the entire loan package to Ukraine, approved in March 2014
(see Observer, Spring 2014), could have been under threat.

However, this situation was pre-empted as the IMF executive board
revised its policy in early December by allowing lending to countries
in default under certain circumstances, including when the IMF loan
is considered “essential” and the debtor is making “good faith
efforts” to reach agreement with the creditor. Relaxation of this
rule permitted the Fund to continue lending to Ukraine despite
Ukraine’s non-payment to Russia.

Bodo Ellmers of Belgium-based NGO Eurodad called the reform “an
overdue change” and said “countries must have the chance to stop debt
service to safeguard scarce public resources and still get support
from the IMF. It is worrying however that no clear criteria have been
defined. The fact that the reform was hastily approved because
Russia’s holdout strategy threatened the IMF’s Ukraine programme
proves how political the game is.”

The IMF announced in early December that the allocation of the third
tranche of its loan agreement depended on Ukraine’s parliament
approving the 2016 national budget and tax reform measures, including
higher taxes on alcohol, tobacco and agricultural products. The
conditionalities of the loan package include redundancies in the
public sector, deregulation, taxation of natural resources, freezing
and reducing of pensions, privatisation, and education reforms that
require closure of 5 per cent of Ukraine’s schools, according to
Eurodad.

Vasyl Shilov of the Federation of Trade Unions of Ukraine (PFU) wrote
in October that the IMF loan has “supported the new government to
devalue the hryvnia by 200 per cent, achieve 50 per cent inflation
rate, decline GDP by almost 50 per cent in comparison with 2013,
increase unemployment, reduce the standard of living by a quarter,
impoverish 80 per cent of population, and bring the minimum wage and
pension to a record low – $50-60 per month.”

tinyurl.com/IMF-announces-rule-change
tinyurl.com/IMF-decision-debt-status

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

TOPIC:CONDITIONALITY
News

6. IMF to add China’s currency to SDR basket

Abstract
The IMF has confirmed that China’s currency, the remnimbi or yuan,
will be included in the IMF’s calculation of its international
reserve asset from October 2016.

Summary
- IMF confirms inclusion of China’s currency in SDR basket
- Questions remain over China’s economic reforms and the use of
  capital controls

In late November, the IMF confirmed that China’s currency, the
remnimbi or yuan, will be included in the IMF’s calculation (the
‘basket’) of the value of its international reserve asset, the
Special Drawing Right (SDR), from October 2016. Created in 1969, the
SDR is a form of internal asset used by the IMF to allocate
countries’ financial obligations within the Fund (see Update 65). The
SDR is not a currency itself, it is used by the IMF as a system of
account. Member countries are allocated an amount of SDRs according
to the financial quota contributed to the Fund. SDRs can be used to
make payments toward quota increases and settle debts owed to the
IMF.

The Chinese currency will be treated as a reserve currency alongside
the other SDR currencies (the US dollar, euro, pound sterling and
yen). It will be easier for any country’s central bank to use the
yuan as a reserve or store of value, to exchange with its own
currency or pay international debts. The yuan will represent a 10.92
per cent share, or weighting, of the SDR’s value. China has long
advocated that its economic weight and global importance should be
reflected by the inclusion of the yuan in the SDR basket. To achieve
this, the yuan had to be considered by the IMF to be ‘freely usable’,
e.g. easily convertible.

In November, IMF managing director Christine Lagarde called the
inclusion a “clear indication of the reforms that have been
implemented and will continue to be implemented”. Following the
announcement, the People’s Bank of China confirmed that it will
“deepen and accelerate economic reforms and financial opening up”.
News agency Reuters interpreted the IMF’s announcement as “largely
symbolic, with few immediate implications for financial markets”.
Chinese national news agency, Xinhua, disputed this view in a late
November article arguing that the IMF’s decision is “more than
symbolic”. Uncertain as to whether the IMF would indeed endorse the
yuan’s inclusion, China implemented a “flurry” of reforms designed to
ensure successful inclusion, according to Reuters. The article also
predicted that financial markets would, “remain cautious as long as
China did not fully liberalise capital controls or allow the currency
to float freely”.

Paola Subacchi, of UK research institute Chatham House, wrote in the
Nikkei Asian Review in December that the “five years to push the
yuan’s transformation into an international currency … has been
remarkable”. However, she cautioned that “there is no guarantee that
progress will continue” due to the controls China continues to
maintain on capital flows into and out of China. In contrast, Kevin
Gallagher of Boston University argued that “China will continue to
need to regulate capital flows in order to ensure financial stability
and balanced growth. China should be rewarded for this approach, not
ridiculed.”

tinyurl.com/bwpSDRs

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

TOPIC: IFI GOVERNANCE
Analysis

7. IMF governance: one step forward, one step back

Abstract
Reform to the IMF’s voting shares shifts some power to emerging
countries, but the institution’s leadership selection process remains
opaque and undemocratic.

Summary
- IMF quota reform pending since 2010 finally approved by US Congres
- Lagarde nominated for another five-year term by European states

In mid-December the US Congress authorised the IMF quota and
governance reform initially agreed by the G20 in Seoul, Korea in 2010
(see Update 85). Reform of the IMF’s quota and governance
arrangements had been hostage to US Congressional ratification, as
the US’ voting share gives it an effective veto over the proposed
changes (see Observer Spring 2015). At the time of the agreement, in
2010 then-IMF managing director, Dominique Strauss-Kahn was quoted in
an IMF press release stating: “what we did today puts an end to a
discussion on legitimacy that had lasted for years, almost decades.”

The prolonged inaction had caused increasing frustration among
developing countries. Paulo Nogueira Batista, current deputy
president of the New Development Bank (NDB) and former IMF executive
director of 10 Latin American countries, including Brazil, revealed
to Euromoney magazine in September that “[o]ne reason for the
creation of the NDB is undoubtedly the slowness of the reform process
in the Washington-based institutions.” The establishment by China in
2015 of the Asian Infrastructure Investment Bank (see Observer Summer
2014), which now has a membership of 57 states, is also widely
considered to have been a response to the lack of governance reform
at the World Bank and Fund.

One step forward: IMF quota reform a reality five years after initial
agreement
---------------------------------------------------------------------

Once in force, the reform will substantially increase the Fund’s
financial resources from about US$330 billion to US$660 billion
through a doubling of the IMF’s Special Drawing Rights (see Update
65). The reform will shift more than six per cent of quota shares to
emerging market and developing countries. Brazil, Russia, India,
China and South Africa benefit from an increase of 4.5 per cent of
voting shares which now amount to 14.3 per cent of total IMF voting
power. China will become the third largest member country in the
Fund. While the reform reduces the US’ current share of 16.7 per cent
to 16.5 per cent, the US maintains its ability to veto Fund
decisions. The governance reforms do away with the category of
appointed executive directors (EDs), which currently benefits the
members with the five largest quotas in favour of elected EDs.
Finally, the advanced European countries will reduce their combined
Board representation by two chairs from the current eight or nine
chairs, depending on the rotation of European chairs with non-
European members.

Less than a month after Congress’ approval of the quota reform, the
quid pro quo demanded by Congress was approved: that the IMF’s
exceptional access lending rules, which had been brought in to enable
the IMF to lend to Greece, be eliminated. Members of Congress opposed
the rule on the grounds it gave the Fund too much flexibility and put
the Fund’s money at risk. Prior to the Greek crisis, countries in
distress and with unsustainable debt burdens were required to
restructure and reduce their debt burden before the Fund could lend.
In response to the situation in Greece, in 2010 the IMF’s Executive
Board passed a systemic exemption clause bypassing the requirement
for debt restructuring and enabling the Fund to lend to Greece (see
Observer Summer 2015). The systemic exemption, which allowed lending
to Greece, Portugal and Ireland, has been criticised by developing
states as biased to the developed countries and as an example of a
double standard by the Fund (see Update 86). US Congress’ approval of
the quota reform was essential to ensure that a potential
confrontation between the US and emerging and developing members was
avoided during the IMF and World Bank spring meetings in April 2016.

One step back: IMF leadership ‘selection’ process remains unchanged
---------------------------------------------------------------------

Christine Lagarde’s five-year term as IMF managing director ends in
July of this year. The IMF’s board announced in mid-January that it
has opened a “process for the selection of the Managing Director,
similar to the one used in the previous round” and that “individuals
may be nominated by a Fund Governor or Executive Director.” The
nomination process closes on 10 February and a decision “by
consensus” is expected by 3 March.

The continued leadership of the Fund by a European in the absence of
a competitive, merit-based, open and transparent selection process
would demonstrate that concerns raised by civil society and
highlighted by the IMF’s Independent Evaluation Office’s 2008
background paper remain unaddressed.

While the Financial Times newspaper in January stated that Lagarde
“is widely considered a sure bet for a second mandate” it noted that
Lagarde “faces a trial in France this year over her role in a 2008
payment to businessman Bernard Tapie … Ms Lagarde is accused of
negligence in public office in relation to misuse of public funds, an
offence that carries a maximum sentence of one year in prison and a
fine of up to €15,000.” The IMF board has expressed confidence in the
current managing director.

Despite Lagarde’s legal concerns, the governments of Germany, France
and the UK immediately expressed their support for the renewal of
Lagarde’s term, as has the US government.

tinyurl.com/IEO-2008-evaluation

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

TOPIC: ACCOUNTABILITY
Background

8. The World Bank’s country engagement model

In July 2014 the World Bank introduced a new model to increase
borrower engagement in their projects and programmes. According to
the Bank the model is designed to shift policies and programmes
towards the individual country’s needs and priorities. The four-step
model incorporates a Systematic Country Diagnostic (SCD) to outline
constraints to development; a “systematic, evidence based” Country
Partnership Framework (CPF) to map out Bank support to the country;
and Performance and Learning Reviews (PLR) and Completion and
Learning Reviews (CLR), to find and incorporate project lessons into
future strategies and programmes. The Bank’s Independent Evaluation
Group (IEG) is currently evaluating the first group of SCDs and CPFs,
with a report expected in August 2016.

For the full article, see: tinyurl.com/WB-CEM

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

TOPIC:RIGHTS
News

9.World Bank safeguards: “human rights-free zone”

Abstract
A UN special rapporteur, CSOs and donor countries have critiqued the
lack of human rights in the World Bank's draft new environmental and
social framework, as the consultation process has continued to be
fraught with difficulty.

Summary
- UN special rapporteur critiques World Bank’s approach to human
  rights
- CSOs and donor countries call on Bank to include human rights in
  safeguards
- Consultation process “a failure”

As the third and final consultation phase on the second draft of the
World Bank’s proposed new environmental and social framework (ESF),
replacing the current safeguards, progresses, civil society groups
(CSOs), the UN and certain member states continue to demand that the
Bank incorporates human rights in all its activities (see Observer
Autumn 2015).

In an August report, UN special rapporteur on extreme poverty and
human rights Philip Alston characterised the World Bank as a “human
rights-free zone” and denounced the institution’s current approach to
human rights as “incoherent, counterproductive and unsustainable”. He
criticised that despite the Bank mentioning human rights in its
research, it “doesn’t actually do anything about it in its programmes
and projects, where it really matters.” Alston called on the Bank to
take a new approach to human rights in its legal policy, public
relations, policy analysis, operations and safeguards.

Concerns about absence of human rights from draft safeguards
------------------------------------------------------------

A December joint statement by five African civil society groups
called for revisions to the draft ESF: “We fear that, if adopted as
is, the draft ESF will significantly increase development-related
human rights violations.” Bimbo Oshobe, of the Nigerian Slum/Informal
Settlement Federation who signed onto the statement, added: “The
World Bank must uphold human rights. It cannot hand over its
responsibilities to governments like ours that violate human rights
every day… We need the World Bank to really ensure that our rights
are protected and make sure its projects really benefit the poor.”
Also in December, in a joint statement 180 Latin American and
Caribbean CSOs expressed their concerns about the framework and its
consultation process, including that the draft ESF “avoids references
to international standards on human rights ... lacks a human rights
approach ... lowers the standard for the whole development community”
and goes against the “World Banks goals to eradicate extreme poverty
and promote shared prosperity”.

In addition to public statements by some World Bank executive
directors (EDs) representing borrower countries, EDs from six donor
countries also expressed concern. In June the EDs of the UK, Italy,
Germany, France, the Netherlands and the Nordic and Baltic states
wrote a confidential statement to the Bank board’s Committee on
Development Effectiveness (CODE) on the second draft leaked to the
press in November, stating “it is very much the responsibility of the
Bank to ensure that its operations do not violate human rights”.

Civil society participation in the consultation process has continued
to be fraught with difficulty, due to barriers such as limiting
attendance to those pre-registered and limited preparation time due
to a short notice period (see Observer Summer 2015). In Mexican
online newspaper Sin Embargo a Mexican NGO Fundar called the December
Mexico consultation “a failure” that “did not meet the minimum
requirements needed to ensure an effective process of participation
and consultation”. According to Fundar there were only 13
representatives from Mexican civil society, of which most were only
present because they approached the Bank to enquire about
participation. “Who would have been consulted if no one had sent an
email to request attendance?” wrote Mariana González Armijo, of
Fundar. The third phase of consultations will close on 15 March 2016.

tinyurl.com/UNReportAlston

====================================================================
TOPIC:RIGHTS
News

10.World Bank releases new gender strategy

Abstract
The World Bank Group released its new Gender Strategy for 2016-2023
in December.

Summary
- World Bank Group releases new gender strategy for 2016-2023
- Strategy adopts country-driven approach, focus on evidence and data

In December, the World Bank published its new gender strategy for
2016 to 2023. The strategy was developed after the Bank conducted
formal consultations over the course of 2015 (see Observer Summer
2015).

The strategy outlined the Bank’s objectives related to gender
equality and suggested how the objectives are to be operationalised
within the institution, noting that gender equality is central to the
Bank’s stated goals of ending extreme poverty and boosting shared
prosperity. The achievement of gender equality and empowerment of all
women and girls as articulated in Sustainable Development Goal 5 is
at the centre of this strategy.

The strategy outlined three objectives: 1) improving human
endowments, such as education, health and social protection; 2)
increasing economic opportunities by focusing on removing constraints
to more and better jobs and ownership of and control over assets; and
3) enhancing women’s voice and agency and engaging men and boys. With
these objectives the strategy recognised “structural barriers to
women’s economic participation”, in areas such as sexual and
reproductive health, violence against women, women’s political
participation, and especially the burden of unpaid care work. In
terms of implementation, it places emphasis on outcomes and results.
This includes strengthening the country-driven approach, especially
emphasising the value of collecting sex-disaggregated data,
disseminating evidence of what works, and adopting a more strategic
approach to gender mainstreaming, including developing a more robust
monitoring system. The Bank also identified leveraging of the private
sector as key to effective gender equality outcomes.

Members of the UK Gender and Development Network’s Women’s Economic
Justice (WEJ) working group issued a joint response to the draft
strategy in July 2015 (see Observer Autumn 2015). The submission
demanded a more comprehensive approach to achieving substantive
gender equality that moves away from a strict economic understanding
of women’s economic empowerment. It argued that in addition to
tackling wage inequality and providing jobs and access to financial
services for women directly, the strategy has to confront the
structural causes of these inequalities. The submission also
highlighted the lack of a coherent human rights framework to serve as
a foundation for the entire strategy and the lack of strong systems
of accountability to ensure the Bank’s work is transparent and
accountable.

Preethi Sundaram of the International Planned Parenthood Federation
and lead author of the submission responded that “it is encouraging
that the World Bank Group’s gender strategy goes beyond a focus on
women’s jobs and assets, and considers sexual and reproductive health
and rights and women’s care burden. Despite this, the Strategy should
have focussed more on the quality and conditions of women’s work, to
balance what can feel like an instrumentalist approach to women’s
contribution to economic growth and poverty alleviation”.

tinyurl.com/WB-gender-strategy

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TOPIC:GOVERNANCE
Analysis

11.Where’s the remedy? Development banks must do more to remedy harm
   caused by activities they finance
   Guest analysis by Kris Genovese, Centre for Research on
   Multinational Corporations (SOMO)

Abstract
A report assessing the effectiveness of 11 development bank’s
accountability systems found that they are not effective at
consistently providing remedy to those harmed.

Summary
- Report finds development banks’ accountability systems unable to
  consistently provide remedy
- 10 out of 11 DFIs impeded accessibility to accountability
  mechanisms
- Calls for strengthening of accountability mechanisms

Over 20 years ago the Inspection Panel (IPN) was established,
allowing for the first time those affected by World Bank-financed
activities to voice their concerns to the highest reaches of power
within the institution. The Bank’s accountability mechanisms,
including the later addition of the Compliance Advisor Ombudsman
(CAO) of the Bank’s private sector arm, the International Finance
Corporation (IFC), and its Multilateral Investment Guarantee Agency,
are still relevant and necessary. They are sometimes the only avenues
for communities to seek recourse for harms that may or have occurred
as a result of activities financed by the World Bank Group. They also
provide civil society and stakeholders with a powerful window into
the shortcomings of the Bank’s development model.

Since the IPN was established, many other development finance
institutions (DFIs) have established their own complaints mechanisms,
known collectively as independent accountability mechanisms (IAMs).
While the structure and procedures of IAMs vary, they can bring
together complainants and a DFI’s client to resolve a conflict,
conduct an investigation to determine if the DFI’s environmental and
social policies have been violated, or both. In order for the system
to work and provide remedy to those who are harmed, both the IAM and
its DFI must meet their individual responsibilities.

A January report by 11 NGOs, Glass half full? The state of
accountability in development finance, assessed the effectiveness of
the accountability systems of 11 DFIs to determine how well they are
serving those who they are intended to benefit. The authors concluded
that the ‘glass of accountability’ can be considered ‘half full’ or
‘half empty’, depending on your perspective. Complainants are
undoubtedly better off having access to an IAM than they would be in
its absence. Complaints can generate welcome international attention,
occasionally resulting in changes to the projects and improved
conditions for complainants. However, the mechanisms are not
effective at consistently providing remedy to those harmed — whether
that is adequate compensation for resettlement or restoring access to
clean water or natural resources — for two reasons: firstly, because
the DFIs do not provide IAMs with the mandate they need to be an
effective recourse for complainants; and secondly, they do not assume
their own responsibility in ensuring that remedy is provided to
complainants who have been harmed.

There is more that the IAMs can do to improve their effectiveness,
but those efforts will be in vain without a significant shift in
approach by the DFIs themselves. The report found that all but one of
the 11 DFIs assessed impede access to the IAMs from the very
beginning by failing to require their clients to disclose the IAMs’
existence to project-affected people. DFIs also limit the time window
during which an IAM can accept a complaint, fail to contribute to
solutions achieved through problem-solving processes, and do not
consistently respond to the findings of non-compliance by their IAMs.
When DFIs do develop an action plan to address the findings, they
rarely consult adequately with complainants on its contents. Instead
of viewing complaints as an opportunity to help the very people whom
DFIs are meant to benefit, DFIs seek to defend and justify their own
actions, deny and refute the concerns of complainants, and
marginalise and undermine the mechanisms that handle complaints.

The Avianca case in Colombia illustrates the failure of a DFI to
uphold its responsibility in providing remedy to complainants. A CAO
investigation, disclosed in May 2015 following a November 2011
complaint, demonstrated that the IFC failed to address its client’s
disregard for freedom of association, however, despite these findings
the violations continue.

The report provides two sets of recommendations. The first set seeks
to perfect the current system by identifying best practices that
should be adopted by all IAMs and DFIs. However, simply adopting best
practice will not be enough to ensure that complainants receive
remedy. The report called for the IAMs to be empowered to make
binding decisions to compel action by the the DFIs and their client
and, ultimately, that DFIs pursue a development model based on human
rights that results in less harm to communities. Until this is
achieved, it is imperative that the IAMs are strengthened to ensure
that those harmed by DFI-financed projects are provided the remedy
they deserve.

Kris Genovese, Centre for Research on Multinational Corporations
(SOMO)k.genovese@somo.nl

somo.nl
glass-half-full.org

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TOPIC:FINANCE
Analysis

12. IMF contemplates returning to Greece ... again

Abstract
The IMF has confirmed its participation in negotiations for the third
Greek loan programme since 2010, seeking debt relief, privatisation
and pension reform. The IFC has invested €150 million in Greece's
four main banks.

Summary
- IMF in talks for yet another loan to Greece
- IMF calls for debt relief, privatisation and pension reform
- IFC invests in Greek banks

In January, the IMF confirmed it has been in negotiations for the
third loan since 2010 to the Greek government; the details of the
Fund’s mission are yet to be confirmed. A third loan programme from
the European Central Bank and European Commission was arranged in
February 2015 and extended in August (see Observer Autumn 2015),
however, the IMF was not part of this agreement.

Conditions to IMF lending, outlined in July by newspaper
International Business Times, includes a deepening of Greece’s
privatisation programme, higher taxes on farmers and changes to the
pension system, such as increasing the retirement age. Greece has a
debt of €320 billion ($350 billion) and a debt to GDP ratio
approaching 180 per cent. The Fund claimed Greece’s current pension
system is “unaffordable” and is currently reviewing draft proposals
for reform.

Gerry Rice, the Fund’s director of communications, said in January
that the IMF was “ready to support Greece not only with advice, not
only with technical assistance but also with financing.” In a January
statement made at the World Economic Forum in Davos, Switzerland, IMF
managing director Christine Lagarde said that “such a programme would
require strong economic policies, not least pension reforms as well
as significant debt relief from Greece’s European partners to ensure
that debt is on a sustainable downward trajectory.”

Speaking to the Wall Street Journal in January, Greek labour minister
Giorgos Katrougalos said “for us it’s a red line not to reduce
pensions for a 12th consecutive time”. Greek pensions have been cut
by 40 per cent since the 2010 loan package. He added “We must not
burden the economy further with recession-bringing measures”.

Unions have announced a general strike in February, following
demonstrations and blockades in January with 10,000 mostly self-
employed professionals and farmers, who are at risk of losing more
than three quarters of their annual earnings.

After a meeting with Lagarde in Davos, Greek prime minister Alexis
Tsipras said, “next to balanced budgets, we must also have growth …
We need to be more realistic, and show more solidarity too.”

The IFC gets involved
---------------------

In November, the International Finance Corporation (IFC, the World
Bank’s private sector arm) announced it intended to invest in Greece.
In December, the IFC acquired €150 million ($164 million) worth of
shares in Greece’s four main banks, which, according to a European
Central Bank stress test in October, faced a €14.4 billion ($15.7
billion) shortfall. Dimitris Tsitsiragos, IFC vice president, said
“the main goal is to re-establish confidence and trust about
investing in Greece”, reported Reuters news agency in November.

The IFC invests primarily in developing countries, making this
temporary arrangement unusual rather than unique. It follows, for
example, investments in South Korea during the 1999 Asian financial
crisis.

tinyurl.com/WSJGreecechallenge
tinyurl.com/IMFpressbriefGreece

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TOPIC:CONDITIONALITY
News

13. New report on the IMF in the MENA region

In December, the Bretton Woods Project published the report The IMF
in the Arab world: Lessons unlearnt on IMF policies in Egypt, Jordan,
Morocco and Tunisia, written by Mohammed Mossallem, of SOAS,
University of London.

During the 2011 Arab uprisings, domestic economic reforms were
demanded by a wide range of civil society groups. In response, the
IMF signalled changes to longstanding policies in the region. The
report contrasted the policies endorsed by the IMF pre- and post- the
2011 uprisings and found that while IMF rhetoric may have shifted to
focus more on inclusive growth and social inclusion, its policies
appear little changed in practice.

tinyurl.com/mena-report

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14. Emma Bürgisser & Roosje Saalbrink join Bretton Woods Project

We are delighted to welcome Emma Bürgisser as the Bretton Woods
Project’s new Research and Project Officer on Gender. Emma will
support the implementation of a new Hewlett Foundation-supported
women’s economic empowerment project. The Project also welcomes
Roosje Saalbrink as the new Communications and Research Officer.
Roosje will lead the production of all the Project’s communication
outputs, including the Observer.

tinyurl.com/bwpstaff

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