Memorandum submitted by CAFOD
1. INTRODUCTION
1.1 CAFOD welcomes the opportunity to submit
evidence to the International Development Select Committee's session
on the 2006 Autumn Meetings of the World Bank and IMF. CAFOD is
the official aid and development agency of the Catholic Church
in England and Wales.
1.2 This submission focuses on the World
Bank's Governance and Anticorruption Strategy, a prominent issue
of discussion at the Development Committee. CAFOD followed the
process of the strategy's preparation with interest. This submission
draws in part on a survey of civil society organisations, on the
subject of governance, carried out in 25 developing countries
this year.[48]
1.3 Governance is central to development
discourse. CAFOD recognises that strong and accountable institutions,
political commitment to effective management of the state, and
a vibrant and organized civil society are fundamental to equitable
development. Recently there has been intensified donor focus on
improving governance and combating corruption, which is linked
to an increase in aid and in public scrutiny of aid in donor countries.
1.4 President Wolfowitz has made anticorruption
a signal issue for the World Bank. This led to discussion at the
2006 spring Meetings of the Bank's approach to governance and
anticorruption and the Committee asked the Bank to "lay out
a broad strategy, to be discussed at our next meeting, for helping
member countries strengthen governance and deepen the fight against
corruption, working closely with the Fund, other multilateral
development banks and the membership, to ensure a coherent, fair
and effective approach".[49]
1.5 CAFOD believes that the process of developing
the strategy was flawed, not allowing for meaningful consultation,
either with civil society or other involved stakeholders.[50]
Therefore we welcome the Development Committee's statement that
"the strategy will evolve with implementation and the further
consultation which is planned with partner countries, with the
Fund and with other donors and multilaterals, with civil society
and with the private sector", and that "we stressed
the importance of Board oversight of the strategy as it is further
developed and implemented".
1.6 Our survey of civil society found that
for our partners in developing countries, the Bank suffers from
an overwhelming lack of legitimacy and credibility when dealing
with governance. This is because of:
— the lack of transparency and accountability
in the Bank's own governance structures and in the way the Bank
does business;
— the Bank's overriding focus on economic
liberalization; and
— the level of corruption found in
Bank projects.
The Bank has a narrow operational conception
of governance and anticorruption, based largely on its economic
policy agenda. However, governance challenges are deeply embedded
in the social fabric and political structures of the state. Local
stakeholders, including civil society, appreciate these political
fundamentals in ways in which external actors rarely can.
1.7 The strategy developed by the Bank raised
two key concerns, firstly that the emphasis on protection of Bank
resources from corruption may protect development assistance in
the short term, but would fail to strengthen country systems which
is key to effective delivery of development and fighting corruption.
Secondly that the strategy may result in decreased, or even halted
funding to some countries, perhaps those with the greatest numbers
of poor people.
1.8 As the Bank continues to elaborate its
Governance and Anticorruption Strategy, we believe that it needs
to change its way of working, reducing the imposition of policy
based on external analysis, increasing its responsiveness to local
stakeholders and increasing its own transparency and accountability.
We believe that the Bank has a limited and specific role to fulfil
in supporting governance and anticorruption work. It should not
take on a role as central arbiter of standards of governance or
corruption, or be seen to take on such a role.
2. CAFOD RECOMMENDATIONS
TO THE
BANK ON
ITS STRATEGY
2.1 The Bank's Approach to Governance
and Anticorruption
2.1.1 Corruption must be seen as part of
a complex set of governance challenges and not only a threat to
Bank resources and reputation.
2.1.2 The Bank needs to recognise and better
understand the political nature of governance, while clearly limiting
the scope of its own work on governance to a few areas of its
core competence, such as citizen-oriented public financial management.
2.1.3 There should be a presumption of continued
lending with the exception of situations where serious human rights
abuses are identified by specialized international agencies. Bank
criteria and processes leading to "no-lending" decisions
must be manifest, consistent and transparent.
2.2 The Country Assistance Strategy and
Assessing Governance
2.2.1 The Bank needs to base its governance
assessment on independent analysis, carried out in a transparent
manner, with maximum local input.
2.2.2 Wherever possible, this should be
carried out jointly by the government, the Bank and other donors.
2.2.3 In all cases the process and results
of the governance assessment, and their impact on Bank policy
and programming, should be subject to wide stakeholder scrutiny
and should be made public.
2.2.4 The Bank should work with other donors
to support capacity building for independent local governance
analysis.
2.2.5 The Bank should not take on a role
as central arbiter of standards of governance or corruption at
a general or country-specific level.
2.3 Conditionality
2.3.1 The Bank should not put externally-imposed
conditions on its loans. Rather, mutually-acceptable agreements
should be reached between the Bank and Government on each party's
obligations to ensure that resources are transferred and used
in a transparent and accountable manner, for the purposes intended.
2.3.2 Such agreements should be subject
to ex-ante scrutiny by local stakeholders, including parliament
and civil society.
2.3.3 Conditionality should not be used
to achieve reforms which are political in nature, including economic
policy reforms.
2.4 The Role of the Bank with Respect
to Civil Society
2.4.1 The Bank should not assume a leadership
role among donors in supporting civil society. Any finance should
be provided through arms-length mechanisms.
2.4.2 While the Bank may have a role in
participating in dialogue on high-level policy it must not displace
citizens and other local stakeholders, even in relatively weak
democracies, by intruding in political processes or determining
policy bilaterally.
2.4.3 The Bank should not use conditionality
to increase participation.
2.5 Corruption in Bank Projects
2.5.1 The Bank should consistently work
to ensure it strengthens country systems. It should avoid ring
fencing of projects and establishment of Project Implementation
Units, except in the most extreme cases.
2.5.2 Ex-ante, independent Poverty and Social
Impact Assessments (PSIA) should be carried out on all proposals
for Bank-supported projects.
2.5.3 The Bank should strengthen the IFC
Standards on Social and Environmental Sustainability, IFC Disclosure
Policy and the Equator Principles, and implement fully the recommendations
of the recent Extractive Industry Review (EIR).
2.6 Global Partnerships
2.6.1 The Bank should promote full ratification
of the UN Convention Against Corruption (UNCAC) by all countries
and an effective monitoring system for UNCAC built around transparency
and public participation.
2.6.2 The Bank should vigorously support
restitution of stolen assets and a Fair and Transparent Arbitration
Process (FTAP) to deal with illegitimate debt, including that
arising form its own lending.
2.6.3 The Bank should promote a broader
application of the Extractive Industry Transparency Initiative
(EITI) to address transparency of the contractual and fiscal arrangements
which determine resource flows.
2.6.4 The Bank should support independent
auditing of all debts which could be illegitimate and cancel debts
accordingly. It should support a Fair and Transparent Arbitration
Process to deal with such cases going forward.
2.6.5 The Bank should develop a coherent
strategy to enable civil society to participate effectively and
meaningfully in EITI projects in which it is involved.
2.6.6 The Bank should promote broader application
of EITI to address transparency of the contractual and fiscal
arrangements which determine revenue flows.
2.7 Internal Reform
2.7.1 The governance structure of the Bank
should be radically revised to give fair representation and voice
to developing countries.
2.7.2 The Bank should undertake an overhaul
of disclosure policy, prioritizing public access to information
on Bank operations, policies, strategies and Board discussions
and decisions.
2.7.3 The Bank should comprehensively revise
incentive structures for staff, prioritizing incentives for preparing
and implementing projects and programmes founded on meaningful
participation, understanding of the governance context and transparency.
2.7.4 The role of the Bank's Department
of Institutional Integrity (INT) should be clarified, and systems
for INT accountability put in place.
3. SUGGESTED
QUESTIONS
3.1 CAFOD welcomes the commitments made
at the Development Committee to ensuring broad consultation on
the strategy. However since the meetings European NGOs have been
asked by the Bank to make extensive recommendations on the type
of consultations the Bank should undertake, however once again
with little time to respond and with no commitment by the Bank
to take on Board our recommendations.[51]
How will the UK work to ensure that the Bank undertakes meaningful
consultation with a broad range of stakeholders, including southern
civil society and partner governments?
3.2 In its recent White Paper, "Eliminating
World Poverty—making governance work for the poor"
the UK committed to "working with the World Bank and others
to develop a new, internationally agreed approach to assessing
and tackling corruption in all developing countries". The
World Bank, the European Union, the Austrian, French and UK governments
are amongst those donors who have recently developed governance
strategies. Some of these, including that of the UK, commit to
undertaking governance assessments.[52]
Recognising the commitments of the Paris Declaration[53]
to harmonise analysis, how will the UK ensure that its governance
assessment is coordinated with that of other development actors
including the Bank?
October 2006
48 Further details of CAFOD's survey and our recommendations
to the World Bank can be found in our paper "The World Bank's
Governance and Anticorruption Strategy: a civil society perspective".
The paper directly addresses key elements of the emerging Bank
Strategy on Governance and Anticorruption. This paper has been
endorsed by 22 of our Southern civil society partner organisations
and is attached as an appendix to this memorandum. (Not printed). Back
49
Development Committee Communique«, April 2006, http://web.worldbank.org/WBSITE/EXTERNAL/DEVCOMMEXT/0,,contentMDK:20898375~menuPK:64060743~pagePK:64000837~piPK:64001152~theSitePK:277473,00.html Back
50
See CIDSE (et al.) 31 July letter to President Wolfowitz,
expressing "deep concern at the extremely untransparent and
non-participatory manner in which the strategy is being elaborated"
http://www.cidse.org/docs/200608071455354490.pdf?&username=guest@cidse.org&password=9999&workgroup=
&pub_niv=&lang=en&username=guest@cidse.org&password=9999 Back
51
Email from Guggi Laryea, Global Civil Society Team, 29 September
2006, "please send me your suggestions as soon as possible
on the organization of the next steps consultations on the World
Bank's Governance Strategy. This could include, timing, length,
formats, venues, participants, expectations etc. As was indicated
a proposal will be submitted to Mr Wolfowitz in the coming days
on how to proceed with the consultations. As you will understand
we cannot guarantee you that all your suggestions will be taken
on board, given that we are likely to receive suggestions that
may conflict with each other. Therefore choices will have to be
made." Back
52
The UK will adopt a new "quality of governance" assessment
to monitor governance and our partners' commitment to fighting
poverty. The assessment will be done as part of ourpublished Country
Assistance Plans, or more frequently if necessary. It will be
based ondiscussions with partner governments, civil society and
other international partners. Back
53
Donors commit to, work together to reduce the number of separate,
duplicative, missions to the field and diagnostic reviews http://www.oecd.org/dataoecd/11/41/34428351.pdf Back
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