APPENDIX 1
Memorandum submitted by the Bretton Woods
Project
THE COMPREHENSIVE
DEVELOPMENT FRAMEWORK:
NOT A
HOLISTIC APPROACH
TO DEVELOPMENT
The Comprehensive Development Framework (CDF)
was launched in January 1999 as a "holistic" approach
to development. It emphasises the interplay between macroeconomic,
structural, social and environmental goals. The CDF aims to increase
the involvement of civil society groups, parliamentarians etc
in drawing up and monitoring country development strategies, and
to improve donor coordination. However, whilst its vision is excellent,
in practice it appears to offer little new for those countries
that are piloting it.
In Bolivia, the first country to adopt the approach,
it has become apparent that the Bank does not take seriously the
importance of an holistic approach. The matrix which details which
development agencies are contributing to which sector, and the
interlinkages between the sectors is inadequate for the following
reasons:
(1) it does not incorporate the IMF, therefore
it is not possible to determine whether or not there is harmony
between the macroeconomic reforms advocated by the IMF and the
structural and social reforms advocated by the Bank and supported
by other donors;
(2) it provides scant details of how NGOs
and the private sector are contributing to the development process;
(3) it is not clear how "cross-cutting
issues" such as poverty, gender and the environment will
be incorporated into it;
(4) by mapping them in separate columns the
matrix reinforces distinctions between the different sectors rather
than explores their interplay.
The CDF matrix does not match expectations as
a tool for helping to set more balanced development strategies
and to aid transparency and monitoring. Moreover, the Bank still
has not established an effective, formal strategy for soliciting
comments and involvement of civil society or for disseminating
information to them. The Bank publicly highlighted the experience
in Bolivia as an example of the CDF in action before it had even
informed Bolivian civil society about the CDF. NGO involvement
in the Bolivian National Dialogue which led to the formulation
of a national development plan was not adequate.
Suggested Questions
— The Bank has described the CDF as
"holistic". Why then does it not examine the interlinkages
between the IMF's macroeconomic policies and World Bank structural
and social policies?
— How will "cross-cutting issues"
such as poverty eradication, gender and the environment be incorporated
into the CDF matrix?
— What are the Bank and UK seeking
during the 18 month 12 country piloting of the CDF?
SOCIAL AND
ENVIRONMENTAL GOALS
STILL AN
"ADD-ON"
TO MACROECONOMIC
POLICY TOOLS
In response to a proposal from Gordon Brown
the Bank has been asked by its Development Committee to develop
a set of Principles of Good Social Policy and detail best practices
for achieving them. The process of devising the Principles will
be taken forward by the UN through the Copenhagen +5 Social Summit
process, and the Bank is compiling a report on best practices.
This report will be discussed by the Development Committee at
the Annual Meetings in late September.
It was initially envisaged that the Bank and
Fund would be required to adhere to the Principles when designing
their adjustment programmes such that all macroeconomic policies
would be assessed to determine their positive or negative contribution
to social goals. A preliminary report on the Principles to the
Development Committee stated that:
"macroeconomic, trade and financial polices
have major social effects—on employment, consumption and
distribution. Economic growth should be explicitly poverty reducing
. . .there should be explicit assessment of any trade-offs affecting
the poor in the design of all macroeconomic and financial policy
reforms—particularly in times of crisis."
However, it appears that the IMF will limit
its analysis of the social impacts to protecting, as far as possible,
social spending when government spending is required to be cut;
and the Bank will simply realign its project portfolio to make
sure it is consistent with the Principles and provide more support
generally for the social sectors. Most emphasis will be on requiring
developing country governments to apply the Principles, although
there is no monitoring mechanism to establish whether they are
doing so or not. Which suggests that the Bank and Fund will enforce
the Principles through conditions attached to their loans.
A May 1999 draft report by the Bank's Environmental
and Socially Sustainable Development Department concludes that
Bank staff still routinely ignore its Operational Directive 8.60
on adjustment lending which mandates examination of environmental
and social issues. The draft report finds that "the majority
of loans do not address poverty directly, the likely economic
impact of proposed operations on the poor, or ways to mitigate
the negative effects of reform." And concludes that "greater
efforts should be made to keep the poverty focus as a central
mission of the Bank's work. In most of the adjustment loans, the
connection to poverty is left at the abstract level . . . while
the effects of institutional reform on the real economy and individuals
are not generally considered."
Suggested Questions
— Will the Principles be applied to
all aspects of Bank and IMF programmes, including issues of privatisation,
trade and financial liberalisation etc as the Bank's report recommends?
— Is the Bank developing best practice
guidelines for macroeconomic policies which will have a positive
(or minimal negative) impact on the poorest and most vulnerable
families? Is the IMF involved in this process? Who outside the
Bank and IMF is advising on this?
— Do the Bank and DFID support the
introduction of formal Social Impact Assessments to analyse expected
social outcomes prior to programme implementation?
— What is the Bank going to do to ensure
that its policy directives on the environment, poverty and social
development are being properly implemented?
SAFETY-NETS
ARE NOT
PROTECTING THE
POOR, POVERTY
IS WORSENING
The Bank's contribution to help resolve the
social crises in South East Asia and Brazil has been through providing
loans for social safety-nets, ie providing support for the most
vulnerable households by establishing cash/food for work schemes,
programmes to try to maintain children in school, and subsidising
staple household items such as food. However, these safety-net
programmes have been severely criticised for not reaching the
intended beneficiaries and for failing to disburse the resources
quickly enough.
In Indonesia NGOs have asked the Bank to stop
disbursing money for the social safety-net programme because it
is ineffective and it is contributing to the country's massive
debt burden (particularly as the Bank has not been able to prevent
corruption—and even tried to deny that it existed—in
the safety-net programmes). It is ordinary tax payers who will
have to repay these loans and the loans to the IMF, Asian Development
Bank and the bilateral donors who contributed to the bail-out
package.
In Brazil, the Bank has not provided its loan
directly for social safety-net support. Instead the safety-net
loan is actually being used to help the government boost its foreign
exchange reserves and to repay debts to foreign private creditors—a
role that should be played by the IMF. In return, the government
has committed to find the extra money to maintain social sector
budgets, however, there is no guarantee that it will do so.
A recent report from the World Bank on world
poverty claims that, due to the financial crisis, the International
Development Targets are no longer attainable for most countries
and regions by 2015.
Suggested Questions
— Why is the Bank acting as a second-tier
IMF, helping governments to repay creditors rather than focusing
on the needs of the poor and vulnerable?
— Will the Bank commission an external
evaluation of the impact of its safety-net programmes in Indonesia,
Thailand, Korea and Brazil; and the role it should play in future
bail-out operations?
— What is the Bank's response to the
Indonesian NGOs' concerns that the Social Safety-net programme
should stop beause of the build up of debt?
— Does the Bank or DFID have any evidence
that financial liberalisation contributes to poverty reduction
and achieving the International Development Targets?
WORLD BANK
INTERNAL REFORMS
James Wolfensohn has enacted an impressive-seeming
set of internal reforms at the World Bank, under the "Strategic
Compact" initiative. These include:
— releasing some unneeded staff;
— reorienting staff incentives away
from "the pressure to lend" whereby staff were promoted
on the basis of the volume of loans they prepared to focus on
development results;
— establishing four networks of specialists,
a matrix management system and an internal market.
The budget increment approved by the Board in
1997 to enable the Bank to do this run out this (fiscal) year.
Some Bank staff are complaining that the networks have confused
mandates, that the matrix management system forces people to spend
more time on internal reporting (to two bosses) rather than external
discussions, and the Bank suddenly withdrew the Work Program Agreement,
which was the contractual cornerstone of the internal market system.
Noting appears to have been done to match staff incentives with
development impact, which was to have been achieved by drawing
up a staff scorecard. The slow pace of internal reform is ironic
given the Bank's increasing emphasis on institutional change in
its policy advice work.
Suggested Questions
— Some World Bank staff and outside
commentators appear sceptical about the human resources aspects
of the Strategic Compact reform initiative.
— How satisfied are you that the Bank
has cracked its problems with establishing the matrix management
system and internal market?
— What has been done to align staff
incentives with good quality loan preparation and supervision,
to achieve the "culture of results" of which Wolfensohn
has spoken?
— What key problems remain?
UK INPUT WITHOUT
A STRATEGY
Exactly one year ago (13 July 1998) DFID wrote
to the Bretton Woods Project announcing that "International
Finance Institutions Department has been asked to write an Institutional
Strategy Paper on the World Bank Group by September 1998".
Many NGO representatives attended a meeting last July to discuss
a draft outline of that paper and were promised a further draft
to comment on in a few weeks. Until today, however, DFID has neither
circulated a further draft nor finished the paper.
Suggested Questions
— What are the main elements of the
UK's strategy towards the World Bank?
— Why has the process of producing
an Institutional Strategy Paper taken so long?
NOTE: I hope DFID will share a draft of this ISP
to interested members of the Committee, and that the ISP will
contain a pledge to report to the Committee at least annually
on Bank performance and UK input there?Further Questions
— Do you think the UK Delegation in
Washington and DFID should prepare a short annual report to this
Committee on Bank performance and UK input to the Bank's Board?
— What have been the most significant
UK interventions at the Bank over the last year?
WORLD BANK
ENERGY POLICY
Next week (20 July) the World Bank Board will
discuss an energy policy paper for the Bank, Fuel for Thought.
Despite asking for external comments over more than two years
from NGOs and other interested parties the Bank is not making
the final paper available for final comments before the Board
meeting. The UK, because of the Prime Minister and Deputy Prime
Ministers' international leadership on the climate change issue,
is in a strong position on the World Bank Board (eg compared to
the US) to ensure that World Bank support for energy development
policy and projects is progressive. There has been much internal
debate in the World Bank about whether the Bank policy can contain
timebound targets or indicators for increasing the share of Bank
support for renewable energy as well as whether the Bank should
set up a dedicated energy efficiency unit similar to that of the
European Bank for Reconstruction and Development.
Suggested Questions
— Does the World Bank's new energy
policy contain sufficient pledges on renewable energy and energy
efficiency?
— Why did the Bank not release the
final Fuel for Thought paper for comments before this week's Board
meeting?
— Has the UK Delegation in Washington
made energetic and significant inputs on this?
WORLD BANK
SUPPORT FOR
PRIVATE SECTOR
DEVELOPMENT
Last year during the negotiation of government
contributions to IDA 12, the World Bank produced a paper on its
approach to private sector development which UK NGOs and government
officials agreed was very unclear and inadequate. The UK IDA Deputy
(Tony Faint) helped negotiate agreement that, to compensate, the
World Bank Group would, during 1999, undertake a comprehensive
review of the Bank Group's private sector strategy including how
the different parts of the Group's private sector work fit together
and contribute to poverty alleviation. Despite repeated efforts
to find out whether this will take place no information has been
forthcoming from the Bank. This is especially serious given that
the controversial, probably precedent-setting, Chad-Cameroon oil
pipeline project is about to come to the World Bank Board in October,
involving support for a consortium of oil companies in two of
the world's poorest and most corrupt countries.
Suggested Questions
— Do you expect the World Bank Group
to meet its commitment to a comprehensive review of its private
sector operations' complementarity and impact on poverty reduction
during 1999?
— How will this review be open for
comments from interested outside parties?
— Are you satisfied that the Bank's
rules and policies have been followed in preparing the Chad-Cameroon
oil pipeline project and that this project represents a wise investment
for the Bank?
Bretton Woods Project
July 1999
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