World Bank: New president, old tasks

For the first time there were two very promising candidacies from developing countries during this spring's elections for a new World Bank President. Despite this, the US candidate – Jim Yong Kim – once again emerged victorious.

This is confirmation that the much-vaunted progress being made at the World Bank is often only superficial. The Bank has in fact become more responsive to the concerns of developing countries in recent years. Yet to date, there can be no talk of a fundamental reform.

The new President faces the difficult task of moving ahead as quickly as possible with several faltering reforms. Kim also faces the challenge of giving the World Bank a clearer job description. At present the Bank does support major infrastructure projects and social safety nets for the poorest, as well as climate change funding, private sector development and the strengthening of civil society. Many of these areas are also being addressed by the clearly more democratically organized United Nations. This was what prompted an international coalition of non-governmental organizations, including Alliance Sud, to forward proposals to the future World Bank President in April regarding the topics and reforms to which the Bank ought to give priority.

Governance reform

The reallocation of voting rights is a perennial issue amongst the World Bank's reform projects. In this connection, the Bank has set itself the goal of achieving equality of votes between developing and industrialized countries over the long term. The latest revision yielded very little for poor countries, however, instead favouring countries like Saudi Arabia and South Korea first and foremost. With their high per capita income, these countries have long ceased to be developing countries. Although middle-income countries make up more than 80 per cent of the world's population, they still account for barely more than 40 per cent of the voting rights in the various sub-organizations of the World Bank group.

For the next review of voting rights in 2015, developing countries and non-governmental organizations are therefore calling for the weighting of votes finally to also take account of the population share of the countries concerned. In addition the NGOs are also urging Kim to strive for greater transparency and accountability on the part of the Executive Boards. Up to now almost all Executive Directors have refused to make their positions on important decisions publicly accessible.

Clear guidelines for private sector development

The blanket criticism that World Bank conditionality forces developing countries to adopt a policy of sweeping liberalizations and privatizations is no longer strictly accurate. The Bank's official lending terms have become more flexible since they were reviewed in 2005 and no longer amount to massive macroeconomic interventions on the same scale as previously. Instead the World Bank is increasingly pursuing direct private sector development and is recommending with growing emphasis that developing countries should undertake infrastructure projects at least jointly with private enterprises.

Eurodad and other critical organizations point out in various studies that the primary beneficiaries of these private sector development measures are mostly subsidiaries of multinational corporations. In other words, such a policy means neglecting not only the further development of the public sector but also the local business sector. The World Bank should therefore focus more on promoting the public sector and local companies. Promotional measures that benefit big foreign firms should be tied to clear guidelines, in particular to the observance of human rights and environmental standards and the creation of decent jobs.

Crisis-proof social safety nets

Civil society commends the World Bank’s growing involvement in the building of social safety nets. Individual critical voices nonetheless claim that in so doing it is primarily cushioning the harsh conditionality of the International Monetary Fund, which often imposes draconian cost-cutting measures on developing countries. Besides, the World Bank's in-house evaluation unit recently pointed out that the safety nets being promoted by the Bank offer only limited protection from the impacts of the global economic crisis. They were indeed helping those who had always been poor, but neglecting those households that have recently descended into poverty owing to the crisis. Should the world economic situation deteriorate further, the World Bank would need to develop new tools quickly.

Sustainable energy strategy

One issue that will soon claim the new World Bank President's attention is the ongoing wrangling over the Bank's energy policy. A draft strategy published in 2011 proposed that the Bank should cease to promote environmentally harmful, coal-fired power plants in advanced developing countries. Yet the coal energy lobby successfully persuaded individual emerging countries to oppose this supposedly discriminatory proposal. In contrast, many non-governmental organizations and individual industrialized countries also called for the discontinuation of coal energy projects in poorer countries as well.

The NGOs underline this demand in their letter to the new President. Their demand is for the World Bank basically to focus on smaller energy projects in outlying regions and on improving distribution networks. Unlike the building of massive coal-fired and hydroelectric power stations, this would guarantee poor households the necessary access to clean energy.

Rapid review of the safeguards

One last important civil society concern is the tightening of safeguards, the project-related environmental standards and mechanisms to protect the affected populations. This refers, for instance, to the guidelines for the protection indigenous peoples or for the handling of forced relocation under major World Bank-funded projects. In this case the NGOs are calling specifically for the people affected to have a greater say already at the project planning stage.

The planned revision of these guidelines has come to a standstill, however. The World Bank recently announced that concrete results should not be expected before the end of 2013. Instead, a new credit window was created through the ominous Program for Results that even undermines the previous guidelines (see box).

Mark Herkenrath, Alliance Sud

Article published in: Alliance Sud News No. 72, Summer 2012

Box

The ominous Program for Results

mh. With the new Program for Results (P4R) the World Bank plans to support government-run development programmes consisting of several individual projects. In the process the usual environmental requirements and guidelines for the protection of those affected are being largely overridden. It is thanks at least to resistance from civil society that the Program has initially been limited to a three-year pilot phase. An evaluation is to take place thereafter. Non-governmental organizations are demanding that independent voices as well as those directly affected should have a say in the matter.