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Bretton Woods Observer Winter 2018
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. World Bank’s vision of work leaves it isolated from the
international community (RIGHTS/analysis)
2. IMF quota reforms: The fight for democratic governance continues
(IFI GOVERNANCE/news)
3. Bretton Woods Institutions’ instrumental gender approach ignores
structural elephant in the room (GENDER/analysis)
4. The IMF in Argentina: Can an old dog learn new tricks? (FINANCE/
analysis)
5. Doing Business 2019: World Bank’s tunnel vision obscures calls for
reform (KNOWLEDGE/news)
6. US Supreme Court hears oral arguments on challenge to IFC’s
absolute immunity (ACCOUNTABILITY/news)
7. Civil society apprehensive as World Bank launches new
Environmental and Social Framework (ACCOUNTABILITY/news)
8. IMF and World Bank’s support for privatisation condemned by UN
expert (SOCIAL SERVICES/news)
9. As climate crisis bites, World Bank further distances itself from
coal (ENVIRONMENT/news)
10. World Bank and IMF Annual Meetings marred by clampdown on
People’s Global Conference. Guest comment by Ivan Phell Enrile, Asia
Pacific Research Network, People Over Profit campaign, Peoples’
Global Conference against IMF-World Bank (RIGHTS/commentary)
11. Civil society calls for more protection of human rights defenders
in development as IFC publishes position(RIGHTS/news)
12. IMF appoints Gita Gopinath as its first female chief economist
(IFI GOVERNANCE/news)
13. IFC launches consultation on draft Operating Principles for
Impact Management (RIVATE SECTOR/news)
14. Bank and Fun(d) speak of the year: 12 days of Christmas – an ode
to the World Bank & IMF’s 2018 (HUMOUR/commentary)


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RIGHTS/analysis

World Bank’s vision of work leaves it isolated from the international
community

Summary
- Bank’s flagship report sparks outrage
- International community distances itself from Bank’s vision of work
- Ineffective consultation emblematic of Bank’s blinkered approach

During the World Bank and IMF Annual Meetings in Bali, Indonesia, the
Bank published its flagship World Development Report (WDR) 2019,
which explored the changing nature of work.
The report triggered widespread indignation as a result of its
support for labour market deregulation and its claim that concerns
about automation are “unfounded” (see Observer Summer 2018). Rather
than complementing current understandings on the future of work,
the report’s recommendations clashed with key actors in the
international community.
Indeed, in contrast to a recent IMF working paper warning of the
dangers of automation, the WDR claimed that anxieties about the
impact of technology on employment and inequality are “on balance
unfounded”. Additionally, despite being released on the same month as
a landmark report warning that we have 12 years to limit climate
change, the WDR failed to mention just transition policies. Moreover,
the Bank’s claim that “burdensome regulations also make it more
expensive for firms to rearrange their workforce to accommodate
changing technologies” contradicted its own WDR 2013, which stated
that labour regulations had little or no impact on employment levels.
The critical responses to the WDR from wide-ranging communities,
including feminists, international organisations, trade unions and
diverse civil society groups alike drew further attention to the
Bank’s isolated status for supporting private sector expansion at the
expense of workers’ rights.
Feminists at loggerheads with Bank’s verdict
Responding to the WDR’s disregard for gender inequalities in gender
experts Shahra Razavi and Silke Staab highlighted that “no reference
is made to the critical role of unpaid care work in building human
capabilities.” Indeed, an International Labour Organisations (ILO)
report this year confirmed that women perform 76.2 per cent of global
unpaid care work and that – in spite of this work making a
substantial economic and societal contribution – it remains mostly
invisible and unaccounted for in economic decision-making.
Razavi and Staab further stated that the WDR, “remains wedded to a
rather narrow neoclassical view of human capital…without considering
the bearing and raising of children that creates the basic foundation
which education and experience may enhance.” This analysis chimes
with Elisabeth Prügl’s critique of the World Bank, which recently
laid out the Bank’s role in crafting a version of a neoliberal
hegemony with a “feminist face” (see Observer Autumn 2018).
Indeed, in reference to the WDR, international policy advisor for
women’s rights at ActionAid International, Wangari Kinoti, stated,
“efforts to increase women’s participation in labour while
simultaneously weakening labour protections and ignoring the stark
realities of the exploitation of women’s paid and unpaid labour
represent the dismantling of decent work and international human
rights standards. They will deepen and broaden gender inequalities.”
Handing capital more power to erode labour share
Civil society voices joined forces at a Civil Society Policy Forum
event during the World Bank and IMF Annual Meetings in Bali to
discuss the then-draft report, which they argued supports harmful
policies of deregulation. Kate Lappin from France-based Public
Services International stated, “If we don’t address the fact that
technology is pushing down the value of labour in the economy…we will
end up with an environment where capital [has] increased power
against labour.”
Responding to its publication, which took place just days after the
event, Oxfam stated that the WDR’s central rationale – deregulation –
is discredited, and that it casts serious doubts over the Bank’s
commitment to inequality reduction (see Observer Spring 2018).
In contrast to the WDR, the World Inequality Report 2018, a World
Inequality Lab annual publication on global inequality trends,
identified that better paying jobs are key to addressing sluggish
income growth of the poorest half of the population, adding that
“healthy minimum-wage rates are important tools to achieve this.” The
report further stressed that the “global top 1% earners has captured
twice as much of that growth as the 50% poorest individuals.” This is
a fact of particular concern ten years on from the financial crisis,
as David M. Kotz notes that the seeds of systemic crisis stem from
growing inequality and a financial sector absorbed in risky
activities and a series of large asset bubbles.
The International Trade Union Confederation (ITUC), which represents
207 million workers, issued a scathing written response to the WDR.
The confederation avowed that the report's denial of challenges such
as the existing global inequality crisis, at times contradicts its
own findings, and failed to acknowledge the Sustainable Development
Goals, concluding that “together, this excludes the WDR 2019 as a
serious contribution to discussions on the future of work.”
ITUC General Secretary Sharan Burrow stated that, “Support for
further deregulation will only reinforce strategies of platform
companies to subvert employment relationship rules, increase
precarious work, pay poverty wages and undermine workers’ rights.” An
ITUC report earlier this year found that workers in the informal
economy are particularly vulnerable to abuses, as they are exposed to
inadequate and unsafe working conditions and often earn less.
The World Bank against the tide
Adding to these voices, the ILO issued a response questioning the
approach to some key issues addressed in the Bank’s report. The
reaction specified that they “remain concerned about the WDR’s
approach to labour market institutions, regulations, the informal
economy and social protection,” adding that, “a world with
deregulated labour markets combined with minimal social assistance
and social insurance would have high human and economic costs.”
A consultation leaving a bitter taste
The superficial consultation process during the report drafting
supported long-standing criticisms that the Bank is unwilling to
listen to external voices. The WDR’s publication followed a year-long
effort from coalitions and organisations around the world to
highlight the inadequacy of its initial findings and recommendations
and attempts to re-shape its findings in line with international
standards.
Once the draft WDR was published in early 2018, its failings were
widely documented by academics, trade unions, networks, national and
the international press. A letter was sent from global unions and
over 80 civil society groups, think tanks and academics, asking that
the WDR, “be rewritten to instead promote decent work and inequality
reduction, and that this be made clear when the report is presented
to the Executive Board.” Despite these efforts, the final report
remains strikingly similar to the initial drafts, with only a small
handful of alterations, such as scrapping its support for zero-hour
contracts. This approach brings into question the extent to which the
World Bank has addressed concerns about its knowledge production
raised in the 2006 Deaton Report, which accused the Bank of having a
self-referential approach to research and learning that, “rises
almost to the level of parody” (see Observer Summer 2018).


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In this issue

- Bretton Woods Institutions’ instrumental gender approach ignores
structural elephant in the room, by Juan Pablo Bohoslavsky

- The IMF in Argentina: Can an old dog learn new tricks?

- Doing Business 2019: World Bank’s tunnel vision obscures calls for
reform

- World Bank and IMF Annual Meetings marred by clampdown on People’s
Global Conference, by Ivan Phell Enrile


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IFI GOVERNANCE/news

IMF quota reforms: The fight for democratic governance continues

Summary:
- As the IMF embarks on its quota review, questions remain as to
whether it will redistribute voting shares

The IMF is developing its 15th General Review of Quotas, after the US
Congress failed to authorise the previous IMF quota and governance
reform until 2015, after it was initially agreed in 2010 (see
Observer Winter 2016).
The quota review is designed to take place every five years with the
stated aim of addressing the distribution of shareholding power among
member states. The formula currently used to guide the distribution
of quotas is calculated in accordance to GDP (50 per cent), economic
openness (30 per cent), economic variability (15 per cent) and
international reserves (5 per cent). However, the IMF has stipulated
that a new quota formula is being discussed in the context of the
15th General Review of Quotas.
While the 2010 reforms shifted 6.2 per cent of quota shares towards
poorer countries, they fell significantly short of civil society
calls for a voting system that moved away from the unequal weighting
that prioritises wealth over democracy, fueling a sense of
disenfranchisement.
Dr Fanwell Kenala Bokosi, executive director at Afrodad, said,
“Seventy three years after its establishement, the IMF quota system
still reflects the colonial mentality that prevailed at its
establishment.”
Indeed, the pressure on the IMF to complete the review and address
the democratic deficit is mounting, as the G24 stressed in its
communique at the World Bank and IMF Annual Meetings in October its
concern with the delayed process, and called on the IMF and World
Bank to “strengthen their efforts toward addressing the severe under-
representation of some regions and countries, including at the
managerial levels” (see Dispatch Autumn 2018).


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GENDER/analysis

Bretton Woods Institutions’ instrumental gender approach ignores
structural elephant in the room. Guest analysis by Juan Pablo
Bohoslavsky, UN Independent Expert on Foreign Debt and Human Rights

Summary
- IMF-prescribed austerity continues to hit women hardest
- Harms should be addressed and assessed

The approach the IMF and a number of member states have recently
taken to address gender inequality appears to be mostly instrumental,
rather than anchored in a human rights-based approach that frames the
achievement of gender equality as a goal in and of itself. The report
I submitted a few weeks ago to the United Nations General Assembly,
building on decades of feminist work and analysis, documents the
shortcomings of this approach and how IMF-backed austerity continues
to hit women hardest.
The instrumental approach is in serious conflict with the intrinsic
importance of gender equality as a key component of human rights
standards, particularly in light of the economic policies proposed
and promoted by international financial institutions (IFIs) in recent
years. While some research shows that securing certain human rights
is good for growth and for the distribution of its benefits, there is
no conclusive evidence to show that gender equality is always good
for growth. In fact, other evidence shows that gender inequality can
be conducive to some forms of economic growth.
Cambodia, for example, has seen impressive economic growth over the
last two decades, attributed to garment and footwear exports, which
account for a massive 80 per cent of its export earnings. While the
labour force for this industry is composed almost entirely of women,
the gender wage gap in the country more than doubled between 2004 and
2009, raising the question of whether Cambodia’s competitive
advantage is reliant at least in part on the very structures that
maintain and exacerbate gender discrimination and inequality.
While instrumental justifications could in theory complement human
rights, global trends suggest that this is not happening and that we
are moving towards ever increasing inequality.
The IMF and World Bank’s Structural Adjustment Programmes in the
1980s and 1990s were criticised for imposing harsh austerity measures
that significantly and disproportionately impacted the poor and
exacerbated inequality, including gender inequality. Yet, this is not
just a critique of the past, because even in 2018, the IMF and World
Bank continue to prescribe policies that undermine gender equality
and the fulfilment of women’s human rights (see Observer Summer 2017,
Spring 2018). Some of these include targeting food subsidies,
privatising public utilities, downsizing social safety nets, and wage
bill cuts, along with labour deregulation, reductions in pensions,
public service cuts and regressive tax regimes through the
introduction of, or increases in, VAT, while reducing corporate tax
rates (see BWP briefing, The IMF and Gender Equality and VAT).
The effectiveness of the IFIs’ approach to gender equality also
raises important questions that are relevant to ongoing policy
debates, such as the reduction of coverage of social protection
benefits, contracting fiscal space for social services and
investments in mega-infrastructure projects over those that are
sustainable and gender-responsive. The IMF’s failure to address
structural barriers to women’s enjoyment of economic and social
rights, like violence against women and girls, and its continued
silence about the impacts of illicit financial flows, regressive tax
regimes and privatisation of public services that affect women’s
human rights also reflect the IMF’s blind spots when it comes to
gender just policy interventions.
Meanwhile, the IMF’s ‘gender work’ remains largely centred on the
positive growth effects of closing gender gaps in labour force
participation. While it might be the case that a specific policy that
encourages women to enter into the paid labour force is good for
growth, if entry is not on equal terms with men and no attention is
paid to internationally agreed standards of ‘decent work’, it could
lead to the reinforcement of gender inequality by building an economy
around embedded structural inequalities in labour markets.
Similarly, while the Bank’s 2016-2023 Gender Strategy takes into
account some barriers to women’s economic participation, some argue
that a more comprehensive understanding of women’s economic
empowerment in work-related areas would be needed to achieve
substantive equality, and that the Bank continues to push for the
same macroeconomic policies as the IMF (see Observer Winter 2018).
It seems these institutions are neglecting both the ways in which the
bulk of their macroeconomic policy prescriptions continue to
undermine women’s rights and gender equality, and the macroeconomic
and institutional enabling conditions required to foster gender
equality. At the very least, IFIs should assess and address the harms
caused to women’s rights by their own policy advice, enhance the
voices of those impacted most, and support governments in
progressively creating the fiscal space needed to deliver on their
human rights obligations.


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FINANCE/analysis

The IMF in Argentina: Can an old dog learn new tricks?

Summary
- IMF increases amount of largest-ever loan to Argentina
- Programme based on broken economic theory
- Fund adjudges country’s debt sustainable – unless downside risks
materialise

In September, the IMF increased Argentina’s original $50 billion loan
agreed in June, bringing the total programme to an unprecedented
$57.1 billion over three years. The programme was agreed in the face
of Argentina’s financial crisis, the underlying cause of which was a
rapid build-up of public and external debt, accelerated by abrupt
financial deregulation by the Macri government (see Observer Summer
2018).
IMF policy prescriptions: treatment worse than the disease?
Through its programme, the IMF, which former Argentinian Central Bank
Governor Alejandro Vanoli described in November as having “total
control of economic policy”, prescribes a familiar policy mix with
the aim of eliminating the primary fiscal deficit by 2019. To achieve
this, the agreed IMF loan programme includes “an increase in [grain]
export taxes, scaling back energy subsidies, containment of capital
spending [that] will be compensated for by Private Public Partnership
projects, limiting [tax] exemptions for cooperatives and mutual
organizations, a reduction of discretionary transfers to provinces,”
and, “a freeze in the new hiring of public employees”.
Eerily similar to the tried and failed Greek and 2001 Argentina
programmes, but now with a much larger amount of money at stake, the
new programme once again reflects the flawed economic theory that
claims there is no alternative to austerity as a response to economic
recession, and promises to restore market confidence in Argentina
(see Observer Autumn 2018, Update 79). In fact, prescribing
concurrent fiscal and monetary contraction for a consumption-based
economy in recession with relatively high unemployment is more likely
to be procyclical and further “deepen and extend Argentina’s
recession”, according to business magazine Forbes’ Frances Coppola.
Perhaps reflecting a lack of confidence in the IMF’s ability to avoid
this happening, the peso lost 20 per cent of its value in the two-day
period in August after Macri announced he was seeking to renegotiate
the IMF loan. In response, Professor Daniela Gabor of University of
West England Bristol commented on Twitter, “that ‘#IMF feeling’ when
your star pupil does everything you ask and is doing worse than
Turkey.”
Argentina’s past experience proves this approach has not worked – and
is likely to make things worse in the short-term. Independent
estimates suggest that it will “require at least $40 billion in the
next 14 months” alone to keep Argentina solvent, with another $48
billion projected to be needed in 2019, and that is still considered
optimistic by some. In its own first review of the loan programme in
October, the IMF assessed Argentina’s debt as sustainable, “but not
with a high probability”, seemingly acknowledging the likelihood of
its baseline assumptions not holding true and Argentina once again
becoming insolvent. This begs the question of why the IMF is not
following its own 2017 advice on the necessity of underpinning debt
sustainability assessments with “realistic – rather than heroic –
assumptions”, where, “it is not feasible for the problem to be solved
through further belt tightening,” and instead turning to sustainable
debt restructuring, as long suggested by civil society organisations
such as Belgium-based Eurodad.
Burdens of IMF loan conditionality
Without requiring upfront restructuring of Argentina’s current debt
stock to private creditors, the programme will continue to “put the
burden of adjustments entirely on the shoulders of Argentina’s
population,” according to an October Eurodad blog, in particular on
the poorest and most vulnerable. With the programme taking place in a
context of a cost of living increase of 54 per cent during the past
two years, mass public layoffs, a decline of 12 per cent in average
salaries, quadrupling of gas tariffs and a six-fold increase in
electricity rates, it should come as no surprise that only three
months after its introduction, regional ministers declared a state of
food emergency, while poverty was reported to be spreading “like
wildfire” by October.
Responding to concerns raised in Argentina, in an October interview,
the IMF’s Managing Director Christine Lagarde highlighted the
programme’s social protection minimum spending floor as a safeguard
for the most poor and vulnerable, and expressed hopes of enforcing a
new “safety valve” in allowing increases in social spending, “if the
situation improves”. Having calculated that the social spending floor
in the current programme amounted to $6 for each of Argentina’s 13
million poor for the last six months of 2018, Argentinian civil
society groups described these safeguards as “a mockery”. This
reflects a wider civil society critique on the inadequacies of the
Fund’s approach to social protection floors, which can exclude large
numbers of poor people, as recently brought to the fore as the Fund
designs its new ‘strategic framework on social spending’ (see
Observer Summer 2018, Spring 2018).
As a predictable result of these policy choices, the country has been
paralysed by mass general strikes and historic mobilisations under
the banner, “no to the IMF, no to adjustment”. Despite the supposed
urgent need for more belt-tightening, according to national newspaper
the Buenos Aires Times, ahead of December’s G20 Summit, Argentina
nonetheless found the resources to invest, “100 million pesos in the
purchase of…180 shotguns, 15 million rubber bullets, 2,000 tear gas
projectiles and police vests,” for the occasion (see Observer Winter
2018).
Thus, the IMF is choosing to continue to apply its old broken model
in Argentina, insisting on a familiar adjustment programme, while
many economists, civil society groups, trade unions and the United
Nations continue to offer alternative solutions. One such example is
the establishment of an international debt workout mechanism, another
is the use of human rights impact assessments (as the UN Committee on
Economic, Social and Cultural rights recommended to Argentina in
October) to guide macroeconomic reform programmes. The question is
whether the IMF is capable of changing course.


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KNOWLEDGE/news

Doing Business 2019: World Bank’s tunnel vision obscures calls for
reform

Summary
- World Bank publishes Doing Business 2019 rankings
- Civil society remains concerned about support for deregulation

Once again, the World Bank has been under fire from civil society and
academics for the Doing Business Report, its flagship text that
monitors and ranks the business environment of 190 countries (see
Observer Spring 2018). After criticisms of changing methodology and
political motivation following Chile’s fall and India’s sudden jump
in the rankings last year, civil society responses to Doing Business
2019 continue to raise concerns of bias towards business deregulation
and low corporation taxes.
The report highlights so-called ‘improvers’ – countries the World
Bank considers to have implemented the most business-friendly
regulatory laws across ten areas. In practice, this means countries
that are deemed to have cut “unnecessary red tape”, like minimising
regulations around construction permits and merging or eliminating
taxes. This year’s report includes in its top ten improvers China,
which abolished its business tax, and Togo, which lowered its
corporate tax rate.
Responding to criticism from independent evaluations, the World Bank
has adapted the report’s methodology, but it remains under question
(see Inside the Institutions). Commenting on Chile earlier this year,
former World Bank Chief Economist Paul Romer stated that he did not
have “confidence in the integrity” of the rankings and suggested that
the data may been unfairly skewed towards some countries over others.
He later retracted his comments and resigned.
Doing Business and inequality
This year’s Doing Business ranking highlights Hungary’s corporate tax
rate reduction, now the lowest in the European Union, as a positive
reform. This reflects the ranking’s promotion of low taxes on
businesses through its tax rate sub-indicator, which gives a higher
score to countries that have a total tax and contribution rate equal
to or lower than 26.1 per cent of profit (see Observer Winter 2017).
The ranking also criticises Oman’s increased corporate income tax
rate for making it “more difficult to do business” while rewarding
Cyprus’ abolition of property tax, in contradiction to advice in a
recent IMF blog.
The report runs in stark contrast to Oxfam’s Commitment to Reducing
Inequality Index, launched at this year’s IMF and World Bank Annual
Meetings. Nadia Daar of Oxfam International commented that, “While
Doing Business encourages a ‘race to the bottom’ on corporate
taxation, Oxfam’s index asks governments to consider the equity
outcomes of their policy choices and scores countries worse if their
tax policies are regressive. Singapore, Bahrain, Latvia, Lithuania,
and Mauritius rank among the highest for tax policies by Doing
Business 2019, but those same countries come close to the bottom of
Oxfam’s tax pillar. The Bank wants to remain relevant to today’s
pressing issues, yet its flagship product continues to reward
governments for policies that worsen inequality.”
While the Bank removed an earlier indicator that rewarded the
undermining of labour rights (see Update 66), this year, in the
Labour Market Regulation Annex, it warned of “cumbersome labor
regulatory framework[s],” and cautioned that, “labor markets may not
operate effectively if overregulated.”
Peter Bakvis of the ITUC noted that, “The World Bank claims to
promote inclusive, sustainable economic growth while Doing Business
continues its hostile stance towards labour rights.” He added that
the World Bank’s “stubborn refusal to address considerable criticism
over the purpose and methodology of the Doing Business rankings shows
that it’s sticking to tunnel vision over reform.”


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ACCOUNTABILITY/news

US Supreme Court hears oral arguments on challenge to IFC’s absolute
immunity

Summary
- Plaintiffs make case for ending IFC's 'absolute immunity'

On 31 October, the Supreme Court of the United States heard oral
arguments on the Jam versus IFC case, brought by a local fishing
community harmed by the Tata Mundra power plant in Gujarat, India,
which was partially financed by the International Finance Corporation
(IFC, the World Bank’s private sector arm). As US-based NGO
EarthRights International, which represents the affected communities,
noted, the suit against the IFC was brought after the community was
unable to receive remedy from the IFC or its client (see Observer
Summer 2018).
The US Supreme Court is deciding on the question of IFC’s ‘absolute
immunity’, which the organisation claims to be based on the 1945
International Organisations Immunity Act (IOIA) that granted
international organisations the same immunity from lawsuit as is
enjoyed by foreign governments. The plaintiffs, on the other hand,
argue that foreign governments’ immunity is now guided by the 1976
Foreign Sovereign Immunities Act, under which certain categories of
lawsuits, such as those related to commercial profit-making
activities, are exempted from immunity (see Observer Summer 2018).
The key question in the case is whether international organisations’
immunity refers to the time of the lawsuit, or the moment when the
IOIA was enacted. At the hearings, Jeffrey Fisher of Stanford Law
School, which represented the plaintiffs, argued that, “The word ‘is’
in this court’s jurisprudence always, always means at the time of
suit, not at the time the statute was passed.” In contrast, the IFC
argued that the IOIA “prescribes a standard of virtual absolute
immunity that is fixed and not evolving.” The representative of the
US federal government, Jonathan Ellis, noted that the plaintiffs have
the “far better reading” of the statutory phrase. However, he
expressed doubts about the case’s ability to meet the commercial
activities exception of the 1976 act. The Supreme Court is expected
to take a decision by summer 2019.


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ACCOUNTABILITY/news

Civil society apprehensive as World Bank launches new Environmental
and Social Framework

Summary
- New ESF launched on 1 October
- Concerns it will dilute standards as Bank shifts to more risky
lending

After years of preparation, the new World Bank safeguards for project
lending – the Environmental and Social Framework (ESF) – came into
force on 1 October, amidst lingering concerns that they will dilute
the Bank’s environmental and social standards at a time when it is
pivoting towards more risky project lending.
The rollout of the new ESF occured after the Bank’s shareholders
agreed a general capital increase (GCI) in April for the
International Bank of Reconstruction and Development (IBRD) – the
Bank’s middle income lending arm – and the International Finance
Corporation (IFC) – the Bank’s private sector investment arm (see
Dispatch Spring 2018). The GCI will increase the Bank’s lending
volume. The Bank will undertake more relatively risky lending in
fragile and conflict-affected states (CAS) and lower-middle income
countries, and will continue efforts to ‘de-risk’ and mobilise
private sector investment (see Observer Summer 2017).
Despite a long period of consultation between 2012 and 2016 (see
Observer Autumn 2016), and an extended process of creating ESF
guidance notes for borrowers (see Observer Summer 2018), many civil
society organisations (CSOs) remain unconvinced that the reform of
the Bank’s safeguards has been for the better.
A race to the bottom? Vague clauses leave ESF open to interpretation
The World Bank’s new ESF includes ten new core ‘standards‘ with
guidance notes for borrowers and ‘best practice’ notes for staff
developed over the past two years to guide the ESF’s implementation.
It will apply only to the Bank’s new project lending, not to existing
project loans or to the Bank’s development policy lending.
The new framework includes a ‘use of country system’ provision, which
stipulates that safeguards of borrowers may be used for Bank-funded
projects if they are ‘materially consistent’ with the new ESF. Given
the difficulty of assessing country systems – and the complexity of
monitoring implementation of safeguards in such systems – CSOs are
concerned that the widespread use of borrower systems could lead to a
considerable dilution of safeguards in Bank-financed projects.
The outcome of the GCI negotiations presents further challenges to
the ESF’s implementation, with the Bank set to take on more high-risk
projects, as well as more projects in fragile political contexts. As
independent researcher – and long-time CSO observer – Korinna Horta
noted in an article for German-based website Development +
Cooperation following the ESF’s launch, this will take place
alongside an important shift in the Bank’s pre-project risk
assessments: “A much used ESF term is ‘risk-based management’. It
means that risks are only addressed as they emerge in the course of a
project. …In the past, environmental impact assessments (EIAs) had to
be [done beforehand and] made available to the public before the
Bank’s Board could approve them.”
Horta added that, “civil society organisations…are increasingly being
threatened in many places. Indeed, activists run great personal risks
when they campaign to protect vulnerable minorities and the
environment from the detrimental impacts of large infrastructure
projects,” funded by the Bank and other international financial
institutions (see Observer Winter 2018).
Indeed, at a Civil Society Policy Forum event on the ESF during the
World Bank and IMF Annual Meetings in Bali in October, Indonesian
CSOs complained that under existing Bank safeguards, military police
were often present in consultations about World Bank-financed
projects, raising fears of reprisals for those who spoke out against
proposed projects. Later in October, a proposed World Bank geothermal
project in Indonesia attracted widespread opposition, with Indonesian
CSOs claiming that the environmental and social assessment of the
project was inadequate.
Given the challenges confronting the new ESF, CSOs remain unconvinced
that it is fit for purpose if the Bank is to deliver on its mandate
to implement policies that benefit the poorest.


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SOCIAL SERVICES/news

IMF and World Bank’s support for privatisation condemned by UN expert

Summary
- New report shines a light on the Bank and Fund’s role in promoting
privatisation
- Findings reinforce civil society demands to consider human rights
impacts

An October report by Philip Alston, the UN special rapporteur on
extreme poverty and human rights, on the effect of privatisation on
human rights, has heavily criticised the World Bank and IMF’s
aggressive promotion of it, arguing that widespread privatisation of
public goods in many societies is “systematically eliminating human
rights protections and further marginalising those living in
poverty.”
Following in the footsteps of numerous UN reports, this report warned
against a “tsunami of unchecked privatisation” that has transformed
arguments for fiscal deficit reduction into an ideology of governance
that devalues public goods and services (see Observer Spring 2017,
Autumn 2017). The IMF and World Bank, it claims, are at the heart of
this process.
World Bank paves the way for financialisation
A 1992 World Bank report stated that, “There are virtually no limits
on what can be privatized.” More than two decades later and the
Bank’s Private Participation in Infrastructure Database – which
tracks projects in 139 countries – lists $1,758 billion in total
private investment. Indeed, commenting on the Bank’s Billions to
Trillions and subsequent Maximizing Finance for Development agendas –
which explicitly prioritise private financing and private sector
solutions – Alston noted that these result in “profitable enterprises
being reserved to the private sector and unprofitable activities
remaining publicly financed” (see Observer Summer 2017).
The report argues that voluminous materials promoting this “entirely
one-sided solution to development financing” make no mention of its
human rights implications, adding weight to civil society resistance
towards the Bank’s leveraging of private sector investment (see
Observer Summer 2017, Winter 2017-18). For example, earlier this
year, 5,700 Indonesian women activists fought to ensure the
government’s compliance with the Indonesian Supreme Court’s decision
to ban water privatisation in Jakarta, which was initially introduced
following World Bank advice (see Observer Autumn 2018).
Alston’s report also noted that – unlike the tracking of business
performance – impact studies on human rights and poverty were rare
for private sector projects. A 2017 report by Zeid Ra’ad Al Hussein,
the UN High Commissioner for Human Rights, lamented that while,
“Infrastructure, if well-conceived and implemented, is vital for the
realisation of many human rights … human rights are rarely given more
than lip service [in] the macho world of mega-infrastructure” (see
Observer Summer 2017).
A central recommendation in Alston’s report is a call to “reverse the
presumption, now fully embraced by actors such as the World Bank,
that privatization is the default setting and that the role of the
public sector is that of a last-resort actor that does what no one
else can or wants to do.”
IMF and privatisation: A hidden friendship
In 2014, when asked about the legacy of IMF’s Structural Adjustment
Programmes, IMF Managing Director Christine Lagarde responded,
“Structural adjustment? That was before my time, I have no idea what
it is. We don’t do that anymore.” In contrast, the Alston report
declared that while the Fund “claims to have introduced major changes
to some of its Washington Consensus-era policies, the emphasis on the
privatization of a range of public sector enterprises and activities
continues to feature prominently.”
The report includes an appraisal of ten recent African Article IV
staff reports – the Fund’s tool for conducting economic surveillance
at a country level (see Inside the Institutions) – revealing that the
IMF promoted privatisation in six cases, with most of the remaining
governments already demonstrating a commitment to public private
partnerships (PPPs) and associated projects. Awkwardly for the IMF,
these findings were published just days after the IMF released a note
warning against PPPs, emphasising that, “while in the short term,
PPPs may appear cheaper than traditional public investment, over time
they can turn out to be more expensive and undermine fiscal
sustainability.”
Alston’s report further highlighted the indirect way in which
privatisation can be promoted, whereby fiscal consolidation
encourages governments to retreat from direct service provision.
According to new research by Brussels-based civil society network
Eurodad, 23 of the 26 IMF loans approved in 2016 and 2017 aimed to
achieve fiscal consolidation, with 30 structural conditions in these
programmes explicitly calling for privatisation measures.


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ENVIRONMENT/news

As climate crisis bites, World Bank further distances itself from
coal

Summary
- IFC announces new green equity approach for financial intermediaries
- Bank pulls out of proposed Kosovo coal project

At the World Bank and IMF Annual Meetings in Bali in October, the
Bank signaled that it would further limit its future coal finance
portfolio, introducing a new policy that will encourage divestment
from coal in financial intermediaries (i.e. commercial banks and
asset funds) that are clients of the International Finance
Corporation (IFC, the Bank’s private sector arm). The Bank also
formally announced that a coal-fired power plant in Kosovo, which it
had previously considered funding, was now ‘off the table’ (see
Observer Autumn 2018).
The Annual Meetings took place in the wake of a new report published
by the Intergovernmental Panel on Climate Change in early October,
which warned that governments have just 12 years to reduce global
greenhouse (GHG) emissions by 45 per cent to avert irreversible
global warming and limit global average temperature rise to 1.5°C.
Countries’ current Nationally Determined Contributions to the Paris
Climate Agreement (NDCs) put the global climate on a 3°C warming
trajectory.
The Bank announced its post-2020 climate goals in Katowice, Poland,
at the 24th Conference of the Parties to the United Nations Framework
Convention on Climate Change (COP24) on 3 December (as the Observer
went to press). Despite committing to provide $200 billion in climate
finance between 2021-2025 – including $67 billion in finance
leveraged from the private sector – and increasing the scope of the
Bank’s support for climate action in countries’ national plans and in
specific sectors, the goals don’t include any further restrictions on
the Bank’s fossil fuel-related finance. Civil society organisations
(CSOs) had previously called on the Bank to align itself with the
Paris Agreement by committing to develop a GHG emissions target for
its lending and operations, among other asks.
Civil society cautiously welcomes IFC’s green equity approach
On the eve of the meetings in Bali, IFC CEO Philippe Le Houérou
announced a new ‘green equity approach’ to IFC’s investments in
financial intermediaries (FI) in a blog published on development news
website Devex. Le Houérou wrote, “I want to develop a green equity
investment approach, working with financial intermediaries that
formally commit upfront to reduce or, in some cases, exit all coal
investments over a defined period.” Le Houérou also claimed that over
the past two years the IFC has ring-fenced 95 per cent of its FI
lending for specific activities, effectively introducing a coal
exclusion in these cases. While welcoming the announcement, CSOs
called for robust implementation. “The IFC will need to require full
disclosure by its clients of their exposure to coal and other
environmentally and socially risky projects so that civil society can
monitor the speed and extent to which these banks are actually
getting greener,” said David Pred of US-based CSO Inclusive
Development International.
During a CSO town hall event at the Annual Meetings, Bank President
Jim Yong Kim also announced that the Bank would not co-finance a
proposed Kosovo coal power plant, a controversial project that had
been a mooted exception to its 2013 moratorium on coal project
finance (see Observer Autumn 2018). Kim said, “We have made a very
firm decision not to go forward with the coal power plant, because
we’re required by our bylaws to go with the lowest-cost option, and
renewables have now come below the cost of coal.”
Deep decarbonisation – opportunities and challenges
The Bank succeeded in increasing its ‘climate-related investments’ to
32 per cent of its portfolio in fiscal year 2018 (FY18) – marking a
significant increase from a baseline of 18 per cent in FY15. However,
despite recent progress, the Bank still has significant fossil fuel
investments in its portfolio (see Observer Spring 2018). A study
released  by Oxfam International in October showed that the Bank
continued to fund more fossil fuel projects than green ones across
ten ‘climate vulnerable countries’ in Asia between FY16-18.
Meanwhile, a co-authored study from Bank Information Center Europe &
SOMO highlighted that in the last two years the IFC’s FI clients have
continued to back large-scale fossil fuel projects including oil and
gas, and coal-related projects in Myanmar and India.
CSOs have also pointed out that the Bank’s new coal-related
announcements do little to address its legacy of past coal
investments. In the Philippines, a complaint filed with the IFC’s
independent accountability mechanism – the Compliance Advisory
Ombudsman (CAO) – accused the IFC of helping to finance 19 new coal-
fired power plants through investments in two financial
intermediaries (see Observer Winter 2017-2018) – a case which the CAO
is currently assessing. Previously, research by Inclusive Development
International found that IFC loans were linked to the construction of
at least 41 coal plants in developing countries between 2013 and 2016
(see Observer Winter 2017). “The IFC should atone for the negative
impacts of its past decisions, as a matter of social responsibility
and justice,” said Bibiano Rivera, of the Philippines Movement for
Climate Justice. CSOs have called for IFC to ensure that harms caused
by existing coal projects supported via FI clients are remedied and
local communities receive adequate redress.


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RIGHTS/commentary

World Bank and IMF Annual Meetings marred by clampdown on People’s
Global Conference. Guest comment by Ivan Phell Enrile, Asia Pacific
Research Network, People Over Profit campaign, Peoples’ Global
Conference against IMF-World Bank

Summary
- Bali Annual Meetings overshadowed by clampdown on independent events
- People’s Global Conference resilient in face of repression
- Calling on peoples’ movements to forge international solidarity

Such gestures, however, have been overshadowed by the increased
stifling of movements and organisations, as recently demonstrated by
the clampdown on dissent during the 2018 Annual Meetings of the IMF
and World Bank, which took place in Bali, Indonesia, in October.
While the red carpet was rolled out for high-ranking state officials
and big business interests in Nusa Dua, social movements and CSOs
were subjected to blatant violations of their rights to free
expression and assembly by the government of Indonesia for attempting
to participate in independently organised side events.
Konfrontasi in Bali
Outside the Bank and Fund spaces, government-sponsored repression
descended on the Peoples’ Global Conference against IMF-World Bank
(PGC), an independent initiative of 34 Indonesian and international
social movements and non-governmental organisations. The PGC
represented grassroots communities and sectors that have been
excluded from the development process in their respective countries
and have suffered from rights violations associated with the policies
and programmes of the IMF and World Bank (see Observer Autumn 2017,
Autumn 2018).
A week before the PGC was scheduled to begin, the Bali Intelligence
Police denied the local organisers a permit for the conference
scheduled at the Radio Republik Indonesia. The organisers were told
by hotel establishments that the police had instructed them to refuse
services to the PGC. Anonymous numbers blasted a series of text
messages maligning the PGC as “anti-development” and threatening the
lives and security of coordinators. Hoax event posters were seen
around Bali, linking the PGC to outlawed radical Islamic
organisations, such as Hizb ut-Tahrir, seemingly to justify the
escalation of violence against the conference and its organisers.
Meanwhile, the national police insisted on a new set of ludicrous
requirements, such as copies of passports and the itineraries of
PGC’s international delegates, as well as details of the conference’s
programme. This harassment soon morphed into physical violence
against organising members of the PGC. In the early morning of
October 11, a local militia attacked the Bali Legal Aid office in
Denpasar and chased away PGC youth volunteers staying there.
Intelligence personnel were also seen around the hotels where PGC
delegates were staying, taking their pictures and videos without
consent.
A win for resilient peoples’ movements
While the Indonesian government succeeded in disrupting the event,
the PGC earned the recognition as the people’s alternative forum to
the official IMF-WBG meetings. With good flexibility, creativity,
quick wit, and firm political resolve, the PGC broke the imposed
silence in Bali.
Civil society groups at the Bali International Convention Center
(BICC) – the official Annual Meetings venue – held a lightning rally
to denounce Indonesia for attacking the PGC and shutting down public
activities. The rally exposed the pretence of hospitality, openness,
tolerance, and good governance peddled by the Indonesian Government
with complicity of the IMF and World Bank.
Seemingly to avoid embarrassment, Bank and IMF staff and the
Indonesian police swiftly herded the protesters into a holding room
and offered to host the PGC, all expenses paid. Meanwhile, outside
the negotiation room, security personnel armed with guns peeping out
of their Batik shirts harassed the demonstrators and denied entry to
six West Papuans seeking to register at the official Civil Society
Policy Forum. Despite these apparent attempts to co-opt the event’s
independence, the PGC organisers stood firm and continued.
Upon regrouping, PGC organisers and participants jointly decided to
proceed with the activities, albeit scaled down and decentralised to
avoid further police sabotage. At least 250 individuals attended
discussions, workshops, and solidarity actions held in different
venues around Bali. PGC statements and mass actions were extensively
covered by both local and international media. Civil society,
peoples’ movements, and individuals across the globe expressed their
support for the PGC. Towards the end of the week, the PGC issued a
declaration calling on organisations to build a strong peoples’ front
to contest international financial institutions in every arena of
struggle.
Another low for global governance diplomacy
Infringement of civil liberties and freedoms by a host country during
an international meeting is not unprecedented. Complete bans on
protests were imposed during the IMF and World Bank Annual Meetings
in Dubai in 2003, as well as the 2006 Annual Meetings in Singapore.
Last year, the Argentine government revoked the accreditation of 63
civil society members a few days prior to the 11th World Trade
Organisation Ministerial meetings in Buenos Aires. The extreme
actions undertaken by the Indonesian government bring global
governance diplomacy to another low and reinforces a worrying
precedent for all future international meetings.
This year marks the 20th Anniversary of the UN Declaration on Human
Rights defenders. Ironically, harassment, criminalisation, enforced
disappearances, and at times, killings of frontline defenders are on
the rise. Multilateral institutions and organisations ostensibly
acknowledge the importance of civic participation and social
accountability in development and have promised to
advance civil society inclusion and empowerment. By failing to
prevent reprisals against defenders, the IMF and particularly the
World Bank in relation to its projects, have not only failed to
uphold their human rights obligations, but also significantly
contributed in fostering a climate of intimidation that dissuades
civil society organisations from exercising their role as development
actors (see Observer Spring 2016, Winter 2018).
The 2021 Annual Meetings of the IMF and World Bank will be in
Marrakech, Morocco. In light of the current global democratic
deficit, global civil society should press the IMF and World Bank and
the future host country to honour their legal commitments to respect
peoples’ rights to organise and mobilise, including through
independent conferences and protest actions, and concretely
demonstrate ways to allow the exercise of such rights without fear of
reprisals. We call on peoples’ movements everywhere to forge
solidarities, push back attacks on fundamental human rights and carve
their own democratic spaces of engagement and resistance in the face
of adversity and repression.


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RIGHTS/news

Civil society calls for more protection of human rights defenders in
development as IFC publishes position

Summary
- Defenders in Development Campaign welcomes IFC’s position on
retaliation against human rights defenders in development but calls
for more specific actions

In October, the International Finance Corporation (IFC, the private
sector arm of the World Bank) released a statement expressing its
position on client retaliation against civil society and project
stakeholders. According to the text, the “IFC does not tolerate any
action by an IFC client that amounts to retaliation – including
threats, intimidation, harassment, or violence – against those who
voice their opinion regarding the activities of IFC or our clients.
We take seriously any credible allegations of reprisals.”
The statement came after Defenders in Development, a campaign
launched in 2016 by the Coalition of Human Rights in Development,
published an open letter condemning increased violence against human
rights and development campaigners (HRDs). According to international
NGO Global Witness, 2017 was the deadliest on record for land and
environmental defenders, as “at least 207 land and environmental
defenders were killed…indigenous leaders, community activists and
environmentalists [were] murdered trying to protect their homes and
communities from mining, agribusiness and other destructive
industries.”
The coalition welcomed the IFC’s statement, but implored development
institutions like the World Bank to develop more specific procedures,
in particular in the context of its ongoing push for privatisation
through its Maximising Finance for Development approach (see Observer
Summer 2017). As noted by Gretchen Gordon, of Defenders in
Development, “We urge the IFC to develop a comprehensive and detailed
approach to this issue that integrates not just the assessment of
reprisal risks, and addressing risks as they arise, but proactive
engagement to prevent reprisals, robust human rights due diligence,
reprisal-sensitive stakeholder engagement, and a response protocol so
that when threats and reprisals materialize the institution is
positioned to respond in a timely and effective manner to minimize
and remedy harm, and to prevent future attacks.”


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IFI GOVERNANCE/news

IMF appoints Gita Gopinath as its first female chief economist

Summary
- IMF's new chief economist views on exchange rates considered
unorthodox

In October, IMF Managing Director Christine Lagarde announced the
appointment of Gita Gopinath as the Fund’s chief economist, to begin
at the start of 2019. The Fund will join the OECD and World Bank in
having a woman in a top economic position. Despite the apparent
progress on this front, only 25.2 per cent of the Fund’s ‘B-level’
economists are women (see Observer Summer 2018). She will succeed
Maurice Obstfeld, who announced in July he would retire at the end of
2018.
Gopinath is currently John Zwaanstra Professor of International
Studies and Economics at Harvard University. She is also co-editor of
the Handbook of International Economics with former IMF chief
economist Kenneth Rogoff.
Gopinath’s previous stance on exchange rates is considered unorthodox
for the IMF. According to the Financial Times, “her research has
shown that…export flows are quite unresponsive to exchange rates.” It
also highlighted that regarding the 2008 crisis, Gopinath’s research
showed that, “low interest rate environments hurt productivity and
led to misallocated resources.”
Gopinath’s position on exchange rates as the Fund’s chief economist
will be met with intrigue by civil society groups, many of whom have
traditionally criticised the Fund’s opposition to capital controls as
the solution to protect economies when capital inflows pose a
systemic risk (see Observer Spring 2016 and Update 81, 83). The
Fund’s research department, which Gopinath will become head of,
however, accounts for only “around 3% of total staff and produces
only about a fifth of the total research output.” The reality of how
Gopinath’s non-traditional views will influence IMF’s policies
remains to be seen.
Professor Daniela Gabor, from the University of Bristol, noted,
“Prof. Gopinath’s appointment is a step in the right direction. The
IMF now has a chief economist that studies macro-finance, asking
critical questions about the impact of real and financial
globalisation… Research at the IMF has systematically been ahead of
conditionality – I look forward to the day when Prof. Gopinath
convinces the IMF board to take her research seriously and have
program countries, say like Argentina, use capital controls as part
of an IMF stand-by arrangement.”


=====================================================================
PRIVATE SECTOR/news

IFC launches consultation on draft Operating Principles for Impact
Management

Summary
- IFC’s declining development outcome performance as ‘first impact 
investor’ provides useful departure point

In October, the International Finance Corporation (IFC, the World
Bank’s private sector lending arm) launched its draft Operating
Principles for Impact Management, and invited comments on them until
the end of December 2018. The principles define impact management as
“managing [private] investment funds with the intent to contribute to
measurable positive social, economic, or environmental impact,
alongside financial returns.” They are consistent with the focus on
leveraging the private sector finance for development, as outlined in
the World Bank’s Maximising Finance for Development approach (see
Observer Summer 2017).  The focus on ‘impact investing’ also reflects
the IFC’s increasing interest in this area. As development news
website Devex noted in an October article, ‘impact investing’ has
seen a five-fold increase to $228 billion since 2013.
As the IFC claims to have been the first impact investor, its own
challenges are instructive as the development community becomes more
intimately involved in supporting impact investing and private
finance as solutions to long-standing development issues (see
Observer Summer 2018). In addition to general questions about impact
investing, long-standing criticisms about the IFC’s project
selection, (mis-)incentives and harms caused by some of its
investments, as well as the “declining performance” of its
development outcomes are notable.
To those interested in problematising the assumptions underlying the
‘impact investment’ paradigm and concerned about the increasing
financialisation of development processes, the consultation provides
an opportunity to feed into the design of what could become a sector
benchmark.


=====================================================================
HUMOUR/commentary

Bank and Fun(d) speak of the year: 12 days of Christmas – an ode to
the World Bank & IMF’s 2018

Summary
- At the end of every year, the Bretton Woods Project highlights 
some of the most farcical remarks of Fund and World Bank staff. 
This time, it’s set to music.

On the first day of Christmas, Paul Romer submitted his resignation –
after accusing Bank economists of data fabrication
On the second day of Christmas, the Fund researched gender &
inequality – we didn’t expect policy advice on contraception and
fertility
On the third day of Christmas, the Bank published the WDR – surely
their pro-business agenda’s finally gone too far? (Observer Winter
2018)
On the fourth day of Christmas, emerging economies pondered the IMF
quota review, and wondered if reforms would ever go through (see
Dispatch Autumn 2018)
On the fifth day of Christmas, the Bank’s shareholders agreed a
generalllll capitalllll increassssssse! … We’re still waiting for
staff incentives linked to lending volume to cease (see Dispatch
Spring 2018)
On the sixth day of Christmas, the Bank & G20’s misplaced panache –
saw them introduce infrastructure as an asset class
On the seventh day of Christmas, the Bank published #DoingBiz – do
they have a clue what decent work is? (Observer Winter 2018)
On the eighth day of Christmas, the Fund returned to Argentina –
while the markets went to look for pastures greener (Observer Winter
2018)
On the ninth day of Christmas, the Bank launched its ESF scheme –
does anyone know what ‘materially consistent’ means? (Observer Winter
2018)
On the tenth day of Christmas, the Supreme Court debated ‘Jam v IFC’
– after Indian fisherfolk challenged IFC’s ‘absolute
immunity’ (Observer Winter 2018)
On the eleventh day of Christmas, the Bank launched the Human Capital
Project – after the Fund’s austerity is there any state finance for
education left? (Observer Autumn 2018)
On the twelfth day of Christmas, the Bank announced its post-2020
climate goals – as ornaments for its legacy investments in
coal (Observer Winter 2018)
Happy New Year!

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