Memorandum submitted by ActionAid UK
INTRODUCTION
1. ActionAid International is an international
NGO working in fifty countries worldwide, including the UK. While
this submission has been put together by ActionAid UK staff, our
positions and recommendations reflect the experiences of our staff
and partners in Africa, Asia, North America and Europe.
2. ActionAid welcomes the decision of the
IDC to conduct an enquiry into DFID's relationship with the World
Bank. Our research and advocacy work on the World Bank has shown
us that there is an urgent need for reform of the Bank's policies
and governance. Moreover, with a rising UK aid budget and likely
increase in contributions to the World Bank under the IDA 15 negotiations,
we consider this an opportune time for such an enquiry to take
place.
THE WORLD
BANK'S
RELATIONSHIP WITH
DFID, OTHER DONORS
AND STAKEHOLDERS
3. ActionAid UK has considerable concern
about increasing UK funding being channelled into the World Bank,
for four reasons.
(a) Firstly, as outlined below, the World
Bank continues to impose policy conditions onto recipient countries.
These conditions are problematic in two respects. Firstly, the
imposition of policy choices from outside tends to make recipient
governments more accountable to donors than to their own citizens.
Secondly, the particular policy mix promoted by the World Bank
has often had harmful impacts on poor people, particularly poor
women.
(b) Secondly, also as outlined below, the
World Bank's own governance structure is highly undemocratic and
unaccountable. This is undermining the Bank's credibility and
legitimacy in the developing world.
(c) Thirdly, World Bank supported projects,
particularly those in infrastructure, have a poor track terms
of their impacts on poor communities and the environment.
(d) Finally, the World Bank pays inadequate
attention to women's rights and gender equality, even though progress
in this area is vital if we are to meet the Millennium Development
Goals.
POLICIES ON
GOVERNANCE AND
CONDITIONALITY
4. In 2005, the UK adopted a new policy
on conditionality, which stated that DFID would not make its aid
conditional on specific policy choices from recipients. NGOs including
ActionAid welcomed this new position, noting that it placed DFID
at the forefront of donor thinking.
5. The World Bank's policy on conditionality,
meanwhile, falls short of that of DFID. The Bank's "Good
Practice Principles" (GPPs) on conditionality, adopted in
2005, committed the Bank to following a set of five principles,
including ownership, harmonisation, criticality, customisation,
and transparency and predictability. However, the Bank's interpretation
of these principles is ambiguous, and their implementation has
fallen short of expectations.
6. Under the principle of "ownership",
for example, the Bank's emphasis is on a country's acceptance
of a given set of policies, rather than its ability to choose
its own development path. For example, the good practice principles
only identify a need for
"some clear evidence of ownership" and
states that this is provided by "a track record of sound
policy implementation." The Bank even states that where "the
government's own policy agenda is weak ... the Bank would choose
not to provide development policy loans."[2]
This seems far from allowing the genuine policy space that true
ownership would require.
7. The Bank's definition of "transparency
and predictability" focuses solely on Bank-government
discussions and review processes. No mention is made of the need
for the World Bank to be transparent and accountable to citizens
and parliaments about their activities in country, the content
of conditionality matrices, or the nature of their policy discussions
with governments. Similarly, while highlighting the need for predictability,
the Bank makes no mention of the need for predictable multi-year
funding commitments.
8. Forthcoming research from the European
Network on Debt and Development (Eurodad) identifies some progress
in reducing the number of conditions attached to loans, with the
overall burden of conditions (both binding and non-binding) falling
from 42 in September 2005 to 29 today. However, the number of
legally binding conditions remains high, at an average of 12 per
loan.
9. The content of World Bank conditionality
remains heavily focused on privatisation and free trade policies,
despite their questionable track record in reducing poverty. The
Eurodad research, for example, shows that almost one in four of
all conditions are economic policy conditions, and that on average
each loan agreement includes 6 conditions relating to privatisation.
10. This high level of privatisation related
conditionality is alarming given the numerous examples of failed
privatisations promoted by the World Bank. In Tanzania, for example,
the World Bank made aid and debt relief conditional on Tanzania
privatising its water sector. In response the government agreed
to the privatisation, but after two years revoked the contract
of the private company managing the water sector (Biwater) due
to sharp price rises and repeated violations of the contract it
had signed with the government. Biwater is now suing the Tanzanian
government and refusing to release vital documents about the case
to the public.
11. In Mali the World Bank made its provision
of aid dependent on the privatisation of the electricity and cotton
sectors. It has since privatised its electricity sector, a step
which has led to only small increases in coverage but also sharp
increases in electricity prices. However, the Malian government
has so far refused to privatise its cotton sector, as it feels
public ownership is vital to public interest, and as a result
the World Bank has withheld $72 million in aid from Mali.
WORLD BANK
INTERNAL GOVERNANCE
12. In ActionAid's experience, the World
Bank's undemocratic and unaccountable governance structure is
undermining its ability to effectively operate effectively in
poor countries, particularly in the areas of good governance and
anti-corruption programmes.
13. Particular problems with World Bank
governance include the selection of its leadership, voting shares
on the World Bank's board, and lack of transparency.
14. The World Bank's President has traditionally
been chosen by the US Administration, under a gentleman's agreement
dating from the foundation of the World Bank. All Presidents,
including the current incumbent appointed earlier this year, have
been selected in this way. This process is in direct contradiction
to stated UK government policy, which is that `the practice of
picking heads of both [World Bank and IMF] should end.' ActionAid
believes that the World Bank President should be appointed on
merit, regardless of nationality, under a fair and transparent
selection procedure.
15. Seats and voting shares on the World
Bank board are also heavily skewed towards the rich countries.
For example, the UK, along with the US and three other countries,
has its own Executive Director, while 47 Sub Saharan African countries
share only two Executive Directors between them, and only 7% of
the vote. ActionAid believes that voting shares on the World Bank
board should be fully democratic. As a first step towards this,
we advocate a double majority voting system, in which both a majority
of countries and of votes are required to pass any decision.
16. The World Bank is also deeply untransparent,
both in terms of the decisions made at the Executive Board and
its activities in country. Executive Board discussions remain
secret, making it difficult for citizens to monitor their governments
position when key decisions are taken. Transparency is also an
issue at country level. In Pakistan, for example, people negatively
impacted by recent World Bank-funded rehabilitation work on the
Taunsa Barrage in the Punjab, demanded to be formally consulted
during a World Bank inspection of the project, so they could highlight
the devastating flooding, land erosion and displacement it has
caused. In a manner consistent with the failure to consult local
people in any way during the planning for the project, the World
Bank has withheld vital information about the investigation from
those impacted and taken only limited steps to involve them in
their investigations.
THE WORLD
BANK IS
NEGLECTING GENDER
ISSUES
17. Poverty has a female face, and therefore
any efforts to fight poverty need to place women's rights front
and centre. However, the World Bank's Gender Action Plan fails
to sufficiently address the need to empower women. Instead the
policy is based solely upon the fact that it makes `economic sense'
to promote women working in the selected industrial sectors in
which the bank has most influence (i.e. finance, agriculture,
infrastructure, sanitation and so on) because there is an increasingly
strong business case for it.
18. Moreover, the World Bank gender policy
does not cover policy-based lending (which often imposes socio-economically
harmful reforms such as privatisation of healthcare and water
supply, the impact of which falls disproportionately on marginalised
groups, like women and children). Thus operational policies are
the only Bank policies to which civil society can hold the Bank
to account on gender issues.
19. The Bank is also failing to effectively
fight HIV/AIDS, which predominantly impacts upon women. Over the
period 2003-06, average World Bank expenditure on reproductive
health and HIV/AIDS was less than 6% of total spending. Moreover,
World Bank policies are themselves undermining the fight against
HIV/AIDS and gender inequality. Such policies include downsizing
of the public sector, privatisation of public services, imposition
of wage bill ceilings and the promotion of intellectual property
rights, which limit the availability of healthcare among the poorest.
SUMMARY RECOMMENDATIONS
In summary, ActionAid recommends that:
20. The UK should not increase funding to
the World Bank unless it can achieve assurances that the Bank
will end its most damaging practices. As a first step, the UK
must make some of its funding to IDA 15 contingent on the Bank
ending its use of policy conditionality.
21. The UK must press the World Bank to
reform its governance structure. This means:
(a) World Bank leadership selection must
be open to candidate of all nationalities, based on merit.
(b) There must be a radical redistribution
of votes on the World Bank board to ensure greater democracy.
As a first step, a double majority system should be adopted, in
which decisions require approval of both a majority of countries
and a majority of votes.
(c) There must be a presumption of disclosure
of all World Bank documents, open board meetings, and wider consultation
with external stakeholders on all policy proposals.
22. The UK must advocate for the World Bank
to place women's rights front and centre in all its operations.
October 2007
2 World Bank, 2005, Review of World Bank Conditionality,
page 28. Back
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