Memorandum submitted by the Bretton Woods
Project
Introduction
1. The Bretton Woods Project was established
by a network of UK-based NGOs in 1995 to take forward their work
of monitoring and advocating for change at the World Bank and
IMF. See www.brettonwoodsproject.org/about for more details.
2. We feel strongly, that the United Kingdom,
as:- the fourth largest shareholder in the institutions;- chair
of the IMFC and a governor of the Development Committee, the highest
bodies of the IMF and the World Bank respectively;- one of only
two OECD countries where oversight authority over the World Bank
resides within the development ministry;- one of only two OECD
countries with a standing international development committee;
and
- head of both the G8 and the EU in 2005,
is uniquely positioned to scrutinise and press
for reform of the World Bank and IMF.
World Bank/IMF governance: a step backwards
3. Four years ago, the UK Government's Globalisation
White Paper called for work towards a "stronger and more
effective" voice for developing countries in the international
institutions. Then, in 2002 there was unanimous international
agreement in the Monterrey Consensus "to enhance the participation
of developing countries and countries with economies in transition
in the decision-making of the World Bank and IMF". This
issue of enhancing the participation of developing countries has
been on the agenda of every meeting of the Development Committee
(DC) since that time:- September 2002: DC asks boards "to
prepare a background document to facilitate consideration of these
important issues at our next meeting." - April 2003: DC
requests "a progress report for our next meeting" -
September 2003: DC "looks forward to concrete action by
our spring meetings" - April 2004: DC "looks forward
to receiving reports … and to further discussion." -
October 2004: DC "looks forward to receiving a report regarding
the feasibility of these options to allow us to address the necessary
political decisions at our next meeting."
4. The only progress in that time has been steps
taken to enhance the administrative and technical capacity of
large multi-country constituencies (47 African countries, for
example, are represented by just two directors). While we welcome
DFID's support for the Analytical Trust Fund, to support the research
and analytical capacity of African Executive Directors' offices,
we feel that this should in no way be seen as a substitute for
reform of an inequitable governance structure.
5. Selection of the heads of the World Bank and
IMF will re-surface as a key test of the institutions' commitment
to good governance when the term of current Bank president James
Wolfensohn ends in 2005. The positions continue to be in the
gift of the United States and the EU respectively. After the
resignation of the former IMF Managing Director early in 2004,
UK NGOs reminded the Chancellor of the government's commitment
to "open and competitive processes for the selection of top
management". This was in keeping with calls from southern
country directors and the staff of the Bank and Fund. While we
were encouraged by the presence of a non-European candidate this
time around, the process fell far short on all other counts.
The process was marred by the absence of clear and transparent
set of search criteria, an independent search committee, public
sharing of candidates' platforms or a clear rationale for the
final decision.
6. Reform of the board structure and the voting
weights remains unaddressed. The Finance Department at the IMF
published a report in advance of the annual meetings which took
this debate a step backwards. The report concluded that "quota
formulas using the economic and financial variables and weights
that have been considered broadly appropriate by the Board - are
likely to yield results that would imply a larger calculated than
actual quota share for the advanced economies as a group, and
a smaller calculated than actual quota share for the developing
and transition countries." In so doing, the report ignores
a previous IMF staff report that shows what would be the appropriate
adjustments in calculated quotas in order to exclude intra-trade
in goods among EU countries. According to the G24 group of developing
country directors at the Bank and Fund, developing countries are
under-represented and developed countries are over-represented
when their GDP is compared both at market exchange rate and PPP.
7. The European Union (EU) with a smaller GDP
than the US has 74% greater voting power than the US and is currently
represented by 9 Executive Directors in the IMF Executive Board,
and 56 percent more votes in the World Bank and 8 Executive Directors
in the World Bank. This over-representation of the European Union
comes largely at the expense of the developing countries. Denmark
has a larger IMF quota than South Korea. Belgium has a quota
that is 52 per cent larger than that of Brazil. The EU has nine
executive directors in the IMF, when 47 sub-Saharan African countries
are represented by only two.
Suggested questions:
- While the government has committed itself to
the general principle of more equitable representation for developing
countries in the global governance institutions, will it specify
its position on the questions of leadership selection, board structure
and voting weight?
- Given that this item has been on the official
agenda for nearly three years with little progress; and that Trevor
Manuel - who heads the work on these issues - ends his term as
chair of the Development Committee in 2005; and that the UK Objectives
Note for the annual meetings 2004 called for "detailed proposals"
on the five key structural proposals; will the UK commit to call
for independent arbitration to resolve the impasse if no progress
is made in 2005?
For a joint civil society position statement on Bank/Fund
governance see: http://www.brettonwoodsproject.org/ifigovstat.html
Parliamentary scrutiny: more work needed
8. Over 350 parliamentarians worldwide have signed
a petition demanding a greater role in scrutinising the operations
of International Financial Institutions (IFIs). To date 144 MPs
have endorsed the petition in the UK.
9. Despite agreeing that aid works better if it
supports national ownership of development decisions, loans are
still agreed in a highly secretive manner, parliamentarians still
find their role reduced to rubber-stamping the development proposals
of these institutions and are overruled if they try to challenge
them. Poor people's participation in these decisions is still
limited and conditions requiring cutbacks to social services,
trade liberalisation and privatisation are still attached to debt
relief and loans, despite evidence that these reforms risk increasing
poverty.
10. To end this short-circuiting of democracy,
approval for PRSPs should be shifted from the boards of the World
Bank and IMF to the national parliaments of recipient countries.
Decisions on economic policy reforms should be decided through
national processes rather than forcing them through with the use
of conditions attached to grants and loans. The institutions
should immediately withdraw loan conditions if they are rejected
by a democratically elected parliament. Recognising the weakness
of some recipient country parliaments, donors should have a long-term
objective of providing financial and technical support to bolster
their capacity to analyse and formulate policy alternatives, and
scrutinise multilateral agreements.
11. Parliamentarians in the UK have a responsibility
to oversee the activities of the World Bank and IMF which their
contributions support. This accountability is not possible if
they are not fully informed of the government's actions in those
bodies on their behalf.
12. We welcome the government's recent commitments
in this respect, including:
- imminent introduction of a report on the UK
government's activities at the World Bank;
- commitment to report annually to parliament
on the "broad positions" taken at the Bank board; and
- urging publication of Board minutes within
two weeks of Board discussions by the end of FY05; all Bank monitoring
and evaluation reports made publicly available by the end of FY05;
50% of Economic and Sector Work publicly available by end FY05,
with presumption of full disclosure by end FY07. (ibid)
13. From a survey of OECD Executive Director's offices
on their accountability to legislators, we recommend the following
additional best practices be adopted:
- Release of transcripts of UK interventions
to the boards of the institutions, both oral and written; clarification
that the aforementioned transparency in Bank monitoring and evaluation
reports should include Country Policy and Institutional Assessments
(CPIA);
- Posting of UK objectives for the spring and
annual meetings of the IMF and World Bank at least ten working
days in advance of the meetings;
- Scrutiny of these objectives at a meeting of
the International Development Committee;
- Debate on the annual reports of the UK in the
IMF (Treasury) and the World Bank (DFID - expected) in parliament;
- The recent comprehensive spending review would
suggest that DFID will be channelling a considerably increased
amount of its funds via the World Bank. An independent audit should
be planned of all UK contributions to the BWIs. Only one such
audit has been conducted by an OECD country in the sixty years
of the institutions (Canada in 1992).
14. We support the initiative taken by those UK
MPs which have participated in the Parliamentary Network on the
World Bank (PNoWB). The future legitimacy of this network requires
that it should address issues of representativity, accountability
and independence from the World Bank.
Suggested questions:
- If a democratically elected parliament of
a recipient country rejects economic policy conditions attached
to non-crisis lending, will the UK pressure the institutions to
respect parliamentary sovereignty?
- What further action does the government
plan to take to ensure that its accountability to UK legislators
is up to best practice standards?
DFID World Bank ISP: striking a better balance
between partnership and oversight
15. The Bretton Woods Project has invested considerable
time into facilitating civil society input into both the present
and the previous Institutional Strategy Papers (ISP) for the World
Bank. We feel that while consultation with civil society during
the drafting phase has been adequate, monitoring and evaluation
of progress in achieving objectives is severely lacking.
16. The current ISP makes reference to an internal
DFID review of progress in achieving the previous ISP's objectives.
This document has not been made publicly available.
17. The current ISP fails to make public the indicators
which were established for each of the ISP's objectives. As only
two examples, civil society groups were promised during the consultation
process that an indicator was to be developed on the Bank's relations
with civil society (in relation to objective 8b); and another
to be developed on safeguard policies (under objective 5b).
18. We are concerned that the one-page review of
the previous strategy in the current ISP fails to make any critical
comments on either the failure to achieve the objectives of the
previous ISP or of the Bank's work more generally. This rosy
assessment of the Bank's work is surprising given that the previous
ISP was considerably more rigorous in its recognition of a number
of serious weaknesses including, but not limited to:
- tension between field offices and sector networks
in Washington - recent civil society research in India indicates
that this gap is widening;
- under-resourced monitoring and evaluation -
this continuing problem has been highlighted by US Congressional
hearings on corruption in MDB projects and by research into the
costs of financial unaccountability;
- a tendency to "dominate borrowing countries
and other development agencies" - reinforced by the findings
of a Bank-commissioned survey in 2003 which found that the Bank
"forces its view on developing countries";
- a narrow focus on its own projects "without
giving consideration to more strategic issues". This problem
is the only one which appears - in diluted form - in the current
ISP: "the Bank must make clear its commitment to partnership".
19. While the current review of the previous strategy
indicates "particular areas of progress", it gives no
indication of any failures, and a number of objectives from that
strategy are left unaddressed. These include, but are not limited
to:
- objective 6 on the integration of environmental
considerations into PRSPs;
- objectives 8 and 9 on the effectiveness of
the IFC and MIGA which calls for more activities to be undertaken
in the poorest countries;
- objective 10 calling for support of the Bank's
comprehensive development framework;
- objective 12 urging collaboration with the
IMF in situations of financial crisis.
Suggested questions:
- Will DFID make public its internal review
of progress in achieving the objectives of the previous ISP?
the indicators for the current ISP? and future WB-DFID annual
reviews (as promised in ISP consultations)?
- What action will be taken if objectives
fail to be met? Will future World Bank replenishments be conditioned
upon achievement of the objectives?
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