World Bank’s «Program for Results» proposal

The World Bank is one of the leading lenders to developing countries for infrastructure projects and reform programmes. Yet for decades now it has been in the crossfire of public criticism. Non-governmental organisations (NGOs) regularly uncover new cases where large-scale projects with the Bank’s sponsorship are wreaking social and environmental havoc. One such case is the building of an oil pipeline through Chad and Cameroon. The World Bank withdrew only after local farming families had long been displaced and virgin forests destroyed. An internal report shows that the affected residents had only been allowed to voice their opinions on the first building plans in the presence of government security forces. Open criticism was not possible. In many cases the dispossessed families received no adequate compensation.

Poor implementation of safeguards

The World Bank does in fact have numerous internal guidelines designed to avoid negative social and environmental impacts from projects it funds. There are a total of ten so-called safeguard policies, for example governing consultation with civil society in project planning, compensation and resettlement of displaced persons or the protection of places of worship of indigenous peoples. The practical application of these guidelines leaves much to be desired, however. A report published in 2010 by the Bank's Independent Evaluation Group (IEG) shows that for more than one third of all World Bank projects between 1999 and 2008, the most important safeguards for the affected population and the natural environment were insufficiently monitored and enforced. Not much can be expected in this regard from the recently launched review of the guidelines, which should be completed by 2013. The main problem is not the guidelines themselves but their flawed implementation by the project team.

It is all the more alarming that a new World Bank initiative could undo the progress made to date in terms of environmental protection and social standards. The initiative in question is the creation of a new financing instrument obscurely named «Program for Results» or «P4R» for short. The Concept Note is now at the public consultation stage and should be approved by the Bank's Executive Board at the end this year. NGOs the world over reject this latest move by the World Bank and are urgently calling for improvements.

Program for Results (P4R)

P4R will differ fundamentally from the World Bank's traditional credit instruments. Instead of funding individual projects, the new instrument is expected to support large-scale public programmes comprised of multiple projects being implemented by the government concerned. These may be programmes for the economic development of remote rural areas, for example. The World Bank wants to scrap the usual policy conditionality – the obligation to privatize state enterprises, for instance. Instead it wants to agree with the borrowing authorities on measurable development outcomes on which further financing will depend. One possible outcome, for example, could be a doubling of the number of people with access to major transport routes.

Scant protection for the environment and those affected

The catch here is that under this programme the World Bank wants to dispense with its principal guidelines for safeguarding the environment and the affected people. This concerns the guideline on forced relocation or the one intended to protect the living conditions of indigenous peoples, for example. They are not expected to apply to P4R lending. Instead, before granting the loans the Bank merely plans to verify whether the requesting State has built into its application good enough precautions of its own to avert social and environmental problems. These protective mechanisms will nevertheless be assessed on a case-by-case basis and with the «flexibility necessary» – initially by the responsible World Bank teams themselves, which work closely with the borrowing authorities.

The P4R documents made available so far deliberately leave open precisely what «adequate» measures regarding environmental protection and social rights in the planned programmes should look like. Neither is there any clear indication as to the means to be used for verifying the actual implementation of these measures. The World Bank is therefore allowing itself the scope in the future to grant loans for programmes that fall far short of the current guidelines for the protection of the environment and affected population groups.

The Bank itself denies that its new proposal could lead to a dilution of the existing environmental and social standards. It points out that P4R will not be funding any projects with high social or environmental risks – the so-called A-risks. That is rhetorical nonsense. For first of all, the Concept Note expressly states that the new programme could also support projects with the highest risk level «in individual cases». Second, last year's report by the Bank's Independent Evaluation Group shows that the World Bank often massively underestimates the environmental and social problems associated with its projects and assigns them too low a risk level.

Switzerland critical

At the start of the year the World Bank undertook an initial round of consultations amongst its Member States on the proposed «Program for Results (P4R)» initiative. During Switzerland's official hearing, to which Alliance Sud was also invited, representatives of the State Secretariat for Economic Affairs (SECO) and the Swiss Agency for Development and Cooperation (SDC) showed welcome scepticism. They emphasized that with the P4R the World Bank could undermine its achievements to date in environmental protection and social standards, and therefore called for clearer terms of reference.

So far the World Bank has not taken this official Swiss concern very seriously. Its consultation report sums it up under the rubric of individual non-governmental organisations’ concerns. The requested terms of reference are still a very vaguely formulated even in the revised draft.
The World Bank's Committee on Development Effectiveness – on which the Swiss Executive Director’s office is represented – has now requested a second revision. It is yet to be seen whether it will be any more satisfactory. Alliance Sud calls on Switzerland's representatives at the World Bank to continue to press for the corrections being sought.

Mark Herkenrath, Alliance Sud

Article published in: Alliance Sud News No. 69. Autumn 2011