IF-Eye Newsletter, Issue #15

13 March 2007

This issue highlights why you should be concerned about the World Bank’s involvement in Iraq; an update on the recent World Bank Water Week; and the upcoming Inter-American Development Bank Annual Meetings in Guatemala.

IF-Eye

Issue 15: March 13, 2007

A publication of the Bank Information Center

Welcome to the March 13 issue of the IF-Eye – the Bank Information Center’s bi-weekly synthesis of key developments concerning the international financial institutions. This issue highlights why you should be concerned about the World Bank’s involvement in Iraq; an update on the recent World Bank Water Week; and the upcoming Inter-American Development Bank Annual Meetings in Guatemala. As always, please send suggestions, contributions and subscription requests to:

In this issue:

1. IFI UPDATES
2. CIVIL SOCIETY HIGHLIGHTS
3. SPOTLIGHT: Why you should care about the World Bank and Iraq
4. SPOTLIGHT: Showcase of the Creeping Irrelevance: The Annual Meeting of the Inter-American Development Bank (IDB) in Guatemala
5. SPOTLIGHT: Report from World Bank’s Water Week
6. ANNOUNCEMENTS AND RESOURCES
7. NEW AT BIC: Join the BIC team!

1. IFI UPDATES: What’s new at the institutions, member governments, and private sector

Inter-American Development Bank Annual Meetings. IDB. March 14-20, 2007. Guatemala City, Guatemala. See Spotlight in this issue.

 

Paul Wolfowitz visits Democratic Republic of Congo. World Bank. March 7, 2007. The visit signals heightened interest in the country following the inauguration of a new government, and in the wake of controversy around the forest and mining sectors.

 

First World Bank IDA-15 Deputies meeting takes place in Paris. World Bank. March 5-6, 2007. Donor contributions and priorities will be negotiated over the course of four meetings. Key issues identified prior to this meeting included: IDA’s role in the international aid architecture; Fragile states; Results; and Debt Sustainability Framework (DSF) implementation and debt management capacity

 

European Bank for Reconstruction and Development (EBRD) pilots lending in Mongolia with first country strategy. EBRD. March 2, 2007. The Bank approved its first official country strategy to Mongolia December 5, 2006. The EBRD has already provided individual loans for the country’s municipal, environment, infrastructure, and financial sectors.

World Bank hosts annual Water Week. World Bank. February 27-March 2. See Spotlight in this issue.

IFC accepting comments on six Environmental, Health, and Safety Guidelines (EHS Guidelines). World Bank/IFC. February 28, 2007. Public comment period open until April 28, 2007.

 

EBRD blacklists German firm found guilty of fraud by World Bank. EBRD. February 26, 2007. The European Bank for Reconstruction and Development (EBRD) has blacklisted German company Lahmeyer after the company was found guilty of bribery in the World Bank's Lesotho Highlands Water Project.

African Development Bank, World Bank to collaborate on extractive industries. AfDB, World Bank. February 26, 2007. The two banks agreed to intensify their collaboration on extractive industries work and support for the implementation of the Extractive Industries Transparency Initiative (EITI) at a two-day “experience-sharing meeting” in Tunis.  

 

MIGA reviewing Social, Environmental, and Disclosure Policies. World Bank/MIGA. February 23, 2007. The World Bank's Multilateral Investment Guarantee Agency (MIGA) has posted draft policies for public comment until April 27, 2007. 

World Bank’s integrity unit to undergo “independent” review. World Bank. The World Bank’s Board called for an independent review of the Department of Institutional Integrity (INT) last year, following claims that the Department, under the direction of Paul Wolfowitz’s close ally Suzanne Rich Folsom, was using its power to target critics of the President. Wolfowitz recently appointed Paul Volcker to lead the investigation. But is Volcker the right choice for the job? Volcker’s objectivity should be questioned, the Government Accountability Project (GAP) recently claimed. He has worked closely with INT staff in previous positions at Wolfensohn & Co. and as chairman of the Independent Inquiry Committee into the Oil for Food Program at the United Nations.

European Investment Bank launches public consultation on its Anti-Fraud Policy. EIB. Comments can be submitted until April 18, 2007.  

 

2. CIVIL SOCIETY HIGHLIGHTS: what’s new in civil society and the media

Global Witness calls for Sarah Wykes' freedom to leave Angola. Global Witness. March 9, 2007. Dr. Wykes was arrested on charges of espionage on February 18, 2007. She was visiting Angola to research oil revenue transparency and accountability. On March 12, World Bank President Paul Wolfowitz called for Wykes to be able to operate freely in the country.

 

Sixty European NGOs launch 'Put Your Money Where Your Mouth Is'. Various organizations. March 5, 2007. Groups are lobbying European governments to demand that the World Bank stop policy conditionality and phase out fossil fuel projects. Call issued outside the opening day of World Bank IDA-15 replenishment negotiations in Paris.

 

New briefing: Debt and Women. Jubilee Debt Campaign, ActionAid UK, Oxfam GB and Womankind Worldwide. March 8, 2007. Briefing paper presents the challenges that women face with debt burden and how they shoulder much of the adverse effects. Funds for debt payments most often come from a cut in social services. Women, who are the greatest beneficiaries of social services, as a result feel the greatest losses.

New study: Countries Do Not Need To Be Rich To Treat Women Fairly. Social Watch. March 6, 2007. Study analyzes the Gender Equity Index (GEI) for 2004-2007. The GEI ranks countries according to social indicators analyzing economic activity, empowerment and education. Rwanda, one of the world’s poorest countries, ranked third for the greatest gender equality. The United States’ GEI rating fell 7% since 2004 and has one of the top ten worst regression rates among all 154 nations indexed. There has been limited gender equity progress worldwide; countries with the greatest improvements in gender equity are all developing nations.

International Women’s Day Call: IFIs Must Stop Contributing to Violence Against Women. Signed by over 100 organizations and individuals. March 8, 2007. Gender-blind International Financial Institution (IFI) operations often aggravate existing discrimination against women and girls, particularly among marginalized groups such as indigenous peoples. Statement calls for an open, independent, transparent audit of past loans and compensation where appropriate. IFIs must stop attaching harmful policy prescriptions to their loans and meaningfully strengthen their safeguards to protect women and members of vulnerable groups. The IFIs without any gender policies or strategies—the IMF, EBRD, and European Investment Bank— must develop them, and the IFIs with gender policies fully implement them.

 

DRC government, donors, civil society meet to discuss the future of Congo's rainforests.  Numerous organizations. March 6, 2007. Civil society releases declaration enumerating key demands concerning forest sector management in the Democratic Republic of Congo.

 

Democratic Republic of Congo Country Update BIC and Environmental Defense. February 26, 2007. Update provides information about recent developments, decisions, and civil society activities related to the work of the IFIs in the DRC.

Global Transparency Initiative Update #20. GTI. February 23, 2007. In this issue: UK launch of transparency charter for IFI's, EBRD approves new disclosure procedures, NGO disputes ADB on disclosure of Phulbai coal mine project documents; reports, articles, and more

New survey shows U.S. jewelry retailers are not doing enough to combat blood diamonds. Global Witness and Amnesty International USA. A new survey shows the $33 billion-a-year American jewelry retail industry is failing to take adequate measures to help consumers avoid conflict diamonds.

 

3. SPOTLIGHT: Why you should care about the World Bank and Iraq

Excerpt from longer article available on BIC’s website: /en/Article.3210.aspx

Reports that a World Bank staffer was shot at an Iraqi checkpoint surfaced in late February. The Bank apparently suppressed the news for several days, presumably in an effort to quell concerns about Bank President Paul Wolfowitz’s recent push to re-open a World Bank office in Baghdad. What should the Bank be doing in Iraq? Following is an overview of current Bank involvement in the country, and some reasons why you should be concerned.

The World Bank in Iraq

World Bank activities are guided by a 2006-7 Interim Strategy Note (ISN). The Bank is currently providing both lending and technical advice to the country. It also administers one part of the International Reconstruction Fund Facility for Iraq: the World Bank Iraq Trust Fund (the UN’s Development Group Trust Fund is the other part).

• Lending: The ISN provides a framework for up to $500 million in IDA resources. Another $500 million in IBRD resources may also be available, contingent upon improvements in creditworthiness.
• Analytical & Advisory Services: The Bank is also providing policy reform papers on key issues and sectors, and organizing policy dialogues. Examples of Iraq reform paper topics include: economic reform, investment climate, and state-owned enterprises. One WB policy reform paper (United Nations and World Bank Joint Needs Assessment: Investment Climate (October 2003))  urges Iraq to quickly develop institutions and laws in favor of private and foreign investment. The Bank is also the lead advisor to the IMF’s Iraq program on sectoral strategies including, inter alia, the oil sector.
• Iraq Trust Fund: Through the World Bank Iraq Trust Fund, the Bank finances at least 15 active and completed projects totaling over $400 million, primarily in the Water/Sanitation, Transportation, and Education sectors.
• Office: Bank activities in Iraq have been directed through an office in Amman, Jordan since shortly after the fall of Saddam Hussein. Country Director Joseph Saba is based in Washington, DC. However, Paul Wolfowitz has recently made moves to beef up the Bank’s presence in the country, negotiating a contract with a new resident country director to be based in Baghdad’s “Green Zone”.

So what’s the big deal?

1. The Bank’s rush to re-engage is premature.
   Without stability and security, how can World Bank lending be properly implemented or supervised? 
2. If I want your opinion, I’ll give it to you…
   Wolfowitz has the power to reappoint a resident country director of the Baghdad office, regardless of staff and management concerns. But should he? Recent developments highlight ongoing tensions between Wolfowitz’s team and the Bank’s Board. Many are wondering if these tensions will in turn hamper the President’s ability to successfully raise funds during the upcoming IDA-15 replenishment. 
3. Wolfowitz’s conflict of interest
   In addition to exacerbating tensions within the institution, many see Wolfowitz's actions as confirming longstanding fears that the President will use his role to promote US geopolitical interests. How can an architect of the Iraq war be truly objective in guiding the country's reconstruction?
4. No 'development cancer' in post-conflict environments?
   Paul Wolfowitz has made the fight against corruption a defining theme of his presidency thus far; the Governance and Anti-Corruption Strategy (GAC) is expected to be finalized at next month’s Spring Meetings. The Bank apparently grants special exceptions for countries in conflict. But is that appropriate? Given the astounding amount of debt previously incurred by corrupt regimes, and current calls to cancel these “odious” debts, how can the Bank reasonably turn a blind eye to corruption in post-conflict situations? Wolfowitz and the Bank must walk the talk with respect to corruption and Iraq.
5. Iraq: Open for business!
   IMF lending and debt relief to Iraq is in part contingent upon the country’s development of a petroleum law. The Bank is advising the IMF in the development of the oil sector strategy. More broadly, the Bank is advising Iraq on attracting foreign direct investment through quickly developing investor friendly laws and institutions and also advising on reforming state-owned enterprises. In addition, the Bank is participating in meetings with the IMF, Iraq Minister of Finance, and the International Tax and Investment Center (ITIC) on Iraq’s oil sector.
6. Post-conflict engagement: the Bank's new bread-and-butter?
   Why aren’t other post-conflict countries receiving the same attention from the World Bank?

Moving forward…

The World Bank’s involvement in Iraq provides critical fuel for analyzing the institution’s engagement in post-conflict situations. As intrastate violence has increased, so the Bank has stepped up its involvement in virtually all aspects of “peacebuilding”. Do privatization and conditionality in post-conflict lending really enhance prospects for peace? What is the proper role for the Bank? The World Bank, governments, and civil society must actively engage with these and other questions in the years to come.  

The IFIs must tread especially carefully in post-conflict, resource-rich countries. Iraq’s oil may in fact be a “resource curse”, given the correlation between abundant mineral wealth (in Iraq’s case, oil) and negative economic and political consequences. The IFIs must provide thoughtful development assistance, not use their influence to drum up business in a barely stable post-conflict environment. And the main beneficiaries must be Iraqis, not international consulting firms, international oil companies, the IMF or World Bank.

 

Read the full article on BIC’s website: /en/Article.3210.aspx

4. SPOTLIGHT: Showcase of the Creeping Irrelevance: The Annual Meeting of the Inter-American Development Bank (IDB) in Guatemala

by Vince McElhinny, Latin America Program Manager, Bank Information Center

In the midst of strident protests in opposition to President Bush’s visit and the crush of an embarrassing political scandal, the Inter-American Development Bank (IDB) will struggle to showcase its development achievements in Guatemala and Latin America during its Annual Meeting (March 16-21, 2007). 

President Bush’s recent acknowledgement that life has not improved for Latin America’s poorest only underscores the paradox of the IDB holding its premier event in a country where two of every three citizens live on less than a dollar per day. The IDB will claim credit for it strategy of greater social inclusion in a country where 80% of the poor are indigenous. The Bank will credit its investments in social development in a country that allocates a miserly 10% of its GDP to public expenditure – the lowest in the hemisphere. President Moreno will tout his institution’s achievements in modernizing the state in a country where the government is admittedly captured by organized crime and homicides per capita approximate levels seen during Guatemala’s 30 year civil war.  

IDB promotion of structural adjustment policies of downscaling the state and opening commercial and capital markets beginning in the 1980s were predicted to reduce poverty and diminish long-standing inequity. After three decades of reforms, little or no progress in poverty reduction has resulted in most of Central and Latin America. The available evidence suggests that at best, there is absolutely no indication that the IDB backed reform agenda has resolved long-standing problems in these areas.

Thus the IDB’s decision that Guatemala would be the host of its premier event is surprising for some. Neither Guatemala nor Central America are the ideal places to showcase the record of the IDB as a development bank. In Guatemala, nearly $3 billion of IDB loans have been unable to reorient this country, which has one of the worst development profiles in the region. In Guatemala, two thirds of the population lives in poverty, a vast majority of indigenous people is excluded from the benefits of the society and of a state that presides over one of the lowest levels of public investment in all of Latin America. Like most of Central America, the development indicators paint a picture of decades of failed policy reforms.

Key Moment for the IDB

The 2007 Annual Meeting happens at a moment of change for the bank. A major organizational realignment was announced on Dec. 15 of last year. One of the principal motivations behind the realignment is the growing doubt about IDB relevance to Latin America. In the past two years, an increasing number of new governments have been elected on platforms that directly reject a large part of policy framework that the IDB has pushed (privatization, free trade, top-down infrastructural integration, fast track hydrocarbon development). Other governments benefiting from the recent windfall of oil, gas and mineral prices are taking fewer loans from the IDB. Consequently, lending to the region has been flat.  Facing competition from below in the form of aggressive lending by subregional banks with many fewer social or environmental safeguards, the IDB is challenged to maintain its intermediary market position between the World Bank and a growing field of new sources of development finance for Latin American borrowers. The realignment is intended to make the IDB more agile and responsive to the competition. A great concern is that IDB safeguards, weak as they are, will be further marginalized. 

With a lending volume to Latin America that is has topped out at about $6 billion over the past five years (despite an $8 billion capacity) the IDB is about to be eclipsed region-wide by a smaller sub-regional bank - the CAF. The expected IDB announcements at its Annual Meeting regarding initiatives in clean energy, opportunities for the majority, debt forgiveness, infrastructure mega-projects and realignment reflect an institution in transition, perhaps adrift.

Read the rest of this article, including comments on the IDB’s governance, infrastructure investment and engagement with indigenous peoples, on BIC’s website: www.bicusa.org/idb2007

5. SPOTLIGHT: Report from the World Bank’s Water Week

by Mishka Zaman, Asia Program Manager, Bank Information Center

The World Bank held its annual “Water Week” from February 27-March 1 at its headquarters in Washington, DC. The meetings’ purpose was to exchange knowledge among staff and partners on emerging issues and challenges within the water sector. Sessions were divided into four thematic areas: access, climate change, governance, and health & environment. The Bank will be posting all presentations at www.worldbank.org/waterweek in roughly two weeks. Following are reflections on the water and climate change sessions, which took up a major portion of the program.

Most of the data presented on how changes in the earth’s climate will impact water access and availability painted a very dire picture. Quoting from the Stern Report, the Intergovernmental Panel on Climate Change reports, and the Bank’s own analytical work, Bank staff made the case that some of the most populous countries of the world are already experiencing water stress; shifts in rainfall patterns, rising sea levels, and droughts are expected to worsen this situation. While acknowledging that not enough country specific data exists and more studies are needed to understand localized impacts, the most serious impacts would be on agriculture (hence food security will be threatened) and coastal cities (especially in Asia).

While acknowledging that the Bank does not have all the answers, some suggestions were put forth, including:

• Bank projects should be made “climate proof”, i.e. climate related concerns should be incorporated within project design;
• Analytical support should be extended to governments to help them understand the impacts of climate change on a variety of sectors and then plan with them to adapt to climate variability.
• Some presenters also felt building storage facilities in high stress regions such as South Asia would be one of the more effective ways to deal with uncertainties. Reservoirs could collect water for use in lean periods, protect against floods that are likely to occur due to heavy and concentrated rainfall, and function as freshwater sources that are protected from sea water intrusion.

Clearly, the Bank needs to do much more analytical work before it can adapt its water portfolio to climate change impacts. Whether the Bank overall would play a part in emissions reduction by not financing fossil fuel projects is another story which was not discussed at this forum.

Resources:

• World Bank’s Water Week website (World Bank website)

6. ANNOUNCEMENTS AND RESOURCES

IFI Spring and Annual Meetings on the horizon!

• Inter-American Development Bank Annual Meetings. March 14-20, 2007. Guatemala City, Guatemala.
• World Bank/IMF Spring Meetings. April 14-15. Washington, DC.
• Asian Development Bank Annual Meetings. May 4-7, 2007. Kyoto, Japan.
• African Development Bank Annual Meetings. May 11-18. Shanghai, China.
• European Bank for Reconstruction and Development Annual Meetings. May 20-21. Kazan, Russia.

Monitoring government policies: A toolkit for civil society organizations in Africa. CAFOD, Christian Aid, Trocaire. A 100+ page resource for African civil society organizations, with 28 tools that will enable civil society activists to: identify issues for advocacy; find out about the relevant policies; and collect and present the evidence needed to convince decision-makers.

Contact CHarrison@christian-aid.org for a copy.

Sister-Talk: Relationship counseling for the Fund and the Bank. Economist. March 1, 2007. In March 2006, the World Bank and IMF asked Pedro Malan and his five person team to examine the relationship between the two institutions. The findings report that the two should open communication, while putting greater distance between themselves. The Fund is in a state of distress as its old task of settling “balance-of-payments need” is disappearing. With a lack of cliental the IMF has to evaluate where it will be in the future.     

7. NEW AT BIC: Join the BIC team!

BIC is now hiring for several new positions, including: MENA Program Manager, Africa Program Manager, Europe/Central Asia Program Assistant, Asia Program Associate, Policy Program Associate and IMF Program Senior Associate. Find out more: /en/Page.Jobs.aspx

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