Examination of Witnesses (Questions 40-55)
MR MICHAEL
HAMMER, MR
JEFF POWELL
AND MS
NURIA MOLINA
20 NOVEMBER 2007
Q40 Sir Robert Smith: Are there any
resources available to developing countries to give them the skills
and practical experience of being able to take part in the decision-making
process? Obviously the right to take part is one thing. With the
WTO[18]
there are trusts and so on to try to enable the voice of the developing
countries. Is there any equivalent support from the World Bank?
Mr Powell: The one specific funding—and
Mr Bayley and some others will be aware of this—is the analytical
trust fund that DFID has established to try to build the capacity
of the African executive directors' offices to better be able
to commission research to inform their positions in debate at
the Bank board. I have not seen an evaluation of how well that
has worked or not worked, so I cannot say whether that has been
an effective strategy. There has been movement to try to get funding
for additional advisers, extra bodies in the room for these same
offices. As I understand it, that is stalled over what some might
consider to be a tight wallet but other countries have said there
are issues around what they can and cannot approve in terms of
budget allocations to support such an initiative. Those are the
only two of which I am specifically aware.
Q41 Sir Robert Smith: You mentioned
earlier about transparency. The Bank has a presumption of disclosure,
but what is its practical delivery like?
Mr Hammer: As you say, the starting
point is right, to have a presumption of disclosure. I think we
continue to be worried that there is no narrowly defined set of
exclusions. For instance, the condition that somebody would set
in saying, "These documents or these decision-making processes,
the minutes of these meetings, are part of a deliberative process
that we do not want to disturb and therefore we will not make
them public" from our point of view is not a narrow condition,
and so, in practical terms, we would ask for a policy which is
stricter and which says, "We will make public literally everything,
but there are a number of very narrow points where we will withhold
information; for instance, to protect staff confidentiality if
that is needed on certain issues. But, for instance, which decisions
are taken, which documents are being put into the consultation
process, should be made public." And that is where the World
Bank has a relatively weak record.
Mr Powell: The Global Transparency
Initiative (GTI) is an international coalition of NGOs that combines
both freedom of information advocates at a national level with
the organisations such as my own monitoring the IFIs. It put out
a report Behind Closed BCDoors last year which looked specifically
at this question. It did systematic testing of 30 documents, governance,
programming and policy documents, and in five different countries
put requests in for that same document and got a wonderful array
of different responses, from no response, to "Thanks very
much, we are not giving it to you," to "Here you go."
We see that, though the presumption of disclosure is on paper,
in practice there still are enormous gaps. One year ago there
was a report by the GTI looking specifically, document by document,
at the Bank's practice. I cannot summarise that neatly today but
that is also available from the GTI.
Q42 Sir Robert Smith: There is a
concern that if you had unlimited transparency then the directors'
meetings would become much more formal because people would know
what was going to be put out in the public domain and they would,
therefore, in the margins or the corridors, sort out the positions
and deals which would be completely off the record and unaccountable.
Is there any concern that too much transparency could lead to
that?
Mr Hammer: I think we realise
the tension. In the context of a global organisation that is made
up of representatives of governments who are themselves accountable
to their own constituencies, I think one has to come from an assumption
of maximum transparency. We have seen in the case of the World
Trade Organisation, for instance, that these informal spaces sometimes
exist very openly. There is, of course, a negative impact in the
sense that those are like kind of opaque boxes, you cannot really
look inside what is happening there, but I think the trend that
one would set in motion by asking for more transparency, particularly
about positions taken at the final decision making, will force
also a greater attention to all these other informal negotiation
processes. Initially, such pressure may very well shift some of
those discussions into the corridors or into the green rooms or
whatever you would call them but, at the same time, it would focus
civil society attention, and it may also focus parliamentary attention,
on what is going on in those corridors and, progressively, those
areas will become more and more narrow. So I think there is no
panacea, no solution for achieving the thing right now, immediately,
but I think it is important to push and to force those who are
officially representing large constituencies/nations/citizens
like us to be accountable for what they say, and, in that way,
progressively, the room becomes smaller in which they can do these
deals and those rooms, those spaces, will then come under more
scrutiny.
Mr Powell: In discussions with
colleagues in developing countries, this one becomes quite clear
for me if you put it in a practical case. If I am a representative
of Rwandan small farmers and I want to know how the African executive
director for my region has made the argument at the board regarding
a sectoral loan that involves, for example, the reform of the
Agricultural Marketing Board, which do I prefer: do I prefer that
I can see the argument he made but understand that there may have
been some backroom deals or do I prefer the current situation
where I have no idea? Neither is perfect but I know which one
I want.
Q43 Jim Sheridan: You may have already
answered this question but could I push you a wee bit more on
good governance and transparency and specifically about the selection
of the President of the Bank. As I understand it, all stakeholders
can put in candidates for presidency of the Bank but there seems
to be some cosy arrangement or agreement that America holds the
major influence and gets that position. They say they want good
governance, in the sense that we want to hold people accountable
and they want to set benchmarks for people so they can evaluate
how they are going on. The British Government is also saying it
wants better transparency and fairness in the selection of the
President. What advice would you give to the British Government
in how best we could achieve that?
Mr Hammer: I think it would be
beneficial for the British Government to state publicly that the
agreement that the United States gets to appoint the President
of the World Bank and the Europeans get to appoint the Managing
Director of the IMF should simply end. I think it would be a very
important signal to state that that is not an agreement that stands
the test of time today. I think it would further be very useful
to move toward concrete propositions of how a leadership selection
process could be established. The fact that now there are two
new people in those positions, maybe opens the possibility for
a couple of years of time to thinkthink through the options and
reach an agreement. In my view it is a very good moment to start
now rather than to start three or four months ahead of the next
time that the need for senior appointments arises, when everybody
is rushing and the chance for reform gets much harder. I think
it is important to send a very clear signal now that this type
of agreement is just not fit for our times.
Mr Powell: As many people in this
Committee know I have been pushing this rock up a hill for many,
many years now. Certainly the British Government has, in principle,
taken a clear stand on this issue and I think has put admirable
pressure on by withholding support for both candidates at the
IFIs for probably as long as was sustainable under the realities
of international diplomatic pressure. I could be wrong on that
count. I am optimistic that there will be progress on this issue
now, but, if we do not see progress in the timeframe where we
are likely to have to replace the current set of heads of these
institutions, I think it would be quite useful for the British
Parliament, for example, to tie the hands of the UK executive
director to say that this issue is at a crisis point: the UK executive
director cannot vote to support an American candidate for head
of the World Bank or a European candidate for head of the IMF
in this round—and this is not to suggest that for eternity
this could not happen. At some point the real politik of
international diplomatic pressure has to be taken away if the
international community is in agreement that we are not making
progress on the issue that everyone knows we have to make progress
on. That is about the best that we can come up with. I would be
interested to chat with all of you more on how we might better
put pressure on this government and others of how to make that
change.
Q44 Jim Sheridan: Would it be best
for the UK Government to make this statement unilaterally or would
it be best done in conjunction with perhaps some of our allies
in Europe?
Mr Powell: Ideally, it would be
with as many of the Europeans as possible; ideally it would involve
the Americans as well—some kind of grand bargain. If that
is unlikely, then sometimes a unilateral statement of principle
is a useful one.
Q45 Jim Sheridan: This is probably
an obvious question, but what does the US have to fear?
Mr Powell: I would guess that
the particular administration today fears that European attitudes
towards development are different from their own and they do not
want to see European dominance of this institution. I do not think
that is a realistic fear, but that seems to be the game that is
played.
Q46 Chairman: When the Bretton Woods
institutions were established, clearly Europe was in tatters and
America was in a strong position, but, looking at the shareholdings
now, it is a very odd organisation that gives a minority shareholder
the absolute right to nominate the boss. Is there not a legitimate
argument that says the whole balance of contributions has changed?
I agree with you, a grand bargain would be a better way of doing
it rather than a confrontation, but do you get any sense that
the United States either now or in any changing situation would
be open to understanding that that would be a gesture not just
to the other shareholders but to the developing world that this
organisation was changing?
Mr Powell: I think it would be
very difficult for a future American administration not to accept
those arguments, particularly if we view, that while Europe does
not have clean hands on the nomination of the Managing Director
of the IMF, at least there have been candidates put forward from
other regions and interviews held where the qualifications of
those candidates were evaluated against the priorities for the
institution. For a future American administration not to do that,
to repeat the exercise we have seen with both the nomination of
Mr Wolfowitz and Mr Zoellick, is difficult to imagine as sustainable.
However, I have been proved wrong on this point several times
in the past.
Q47 Hugh Bayley: Do you think the
economic freedom of developing countries would be greater or less
if you had an American head of the Fund and a European head of
the Bank? Would it change things for the better if you were the
government of Tanzania or Mozambique?
Mr Powell: I think it really does
depend which country you are talking about. For the low-income
countries, particularly Africa, the World Bank is the much more
important institution in terms of your policy agenda and in terms
of your development financing. If you are a middle-income country,
then the IMF is the much more relevant institution in terms of
how the IMF responds to any crisis situations or what pressure
it is putting on your country in terms of its surveillance function.
So I would imagine you would get a very uneven answer to that
question depending on who you asked. Ideally, I would have to
say that just swapping them is not going to improve anything:
we need to be able to draw on the experience of ministers from
developing countries who have lived through and created policy
through developing situations more recently. Let us bring that
expertise into these institutions. Let us not look at it as a
defensive exercise but one where we try to improve these institutions
by drawing on a vast pool of experience and knowledge in the relevant
countries.
Chairman: Thank you. I am sure that will
feature in our report.
Q48 Ann McKechin: Following on the
World Bank's experience recently and the resignation of Mr Wolfowitz,
I wonder if you would comment on the credibility of the Bank currently
in terms of governance in the donee countries. It is not just
whether the morale of the staff has affected the Bank's ability
to do its job, because there have been different reports about
widespread discontent, but whether or not you think Mr Zoellick
has managed to calm the waters.
Mr Hammer: I cannot comment on
Mr Zoellick's performance. Before the changeover happened, obviously
things reached a certain boiling point within the Bank, and the
Bank staff were not only concerned about how things worked internally
but they also saw their work going down the drain, in the sense
that most people who work at the Bank have a commitment to development,
to equitable development and justice in the world, and these people
have, in a way, the right to see a leadership in place that is
promoting their work and making it effective rather than undermining
it through the practices. That is where, earlier this year, the
situation reached a certain boiling point and that is why it is
very important for whoever—on the basis of merit, independent
of what country the person is coming from—is in the leadership
position, is playing that supporting role. My understanding is
that Mr Zoellick has managed to bring the World Bank to a certain
degree out of the headlines. There is probably then a management
issue—but some people may consider that to be beneficial
because it allows people to rebuild the credibility of the role—but
it is very important that some headline policies, like, for instance,
the anti-corruption strategy, are being followed through at the
highest level, and that commitment to these is really visible.
Mr Powell: I think we are in the
honeymoon period right now. Nothing was done to violate the honeymoon
period. Staff appointments were made which made sense in the view
of most of the Bank staff. There is a feeling that the new President
is listening to staff. I think that did enough to calm the waters,
to use your phrase. On the governance and anti-corruption plan,
I think it is still too early to tell. Obviously there was a dispute
between much of the board and President Wolfowitz on the direction
of that plan, which wound up with, ultimately, the board taking
more control and a plan that was seen as improved by most of the
civil society groups who work on these issues, to broadly describe
it. But the key, of course, will be in the implementation of that
plan and I do not think the groups that I work with which focus
on these issues feel that it has yet been clarified, certainly
at a high level, how the Bank will transparently evaluate whether
or not the corruption levels are such in a country that they present
a threat to the Bank, what that will mean in terms of changing
modalities of lending, or when, and if, ultimately, the tap is
turned off. Those questions are all still hanging there, with
everyone waiting to see how they are dealt with.
Q49 Ann McKechin: One of the senior
Vice-Presidents who has been appointed was a former minister in
Nigeria. I wonder whether that appointment, given the points you
made earlier about the need to try to seek experience from developing
countries, could assist in terms of building up confidence in
developing nations about the Bank's intentions.
Mr Powell: I think it has. From
the traffic I have seen of the African media on this issue, they
are quite proud to have their former minister at the Bank. There
are always critics. There are many civil society groups who see
her as part of a very similar economic viewpoint as the Bank staff
which they have problems with. So it is not unproblematic but,
in the large, I think it was a positive development.
Q50 Hugh Bayley: DFID's relationship
with the Bank is not just one of funder; is it often, in the field,
one of being a partner. DFID sees its relationship with the World
Bank country offices as a very important relationship. Sometimes
there are big projects which both institutions fund. Is that a
good way of influencing Bank policy on the ground, for them to
be encouraged to work in partnership with other donors? Do you
have examples of good local policies that have been developed
in dialogue between Bank country offices and some donor communities,
perhaps around budget support or around other things?
Ms Molina: At the country level
the World Bank keeps on being the leading agency. I do believe
at the moment we must have bilateral donors, if not including
some of the multilaterals, just to return to the Bank to identify
good practices and to give the space for the World Bank to be
a team member in processes which obviously under the Paris Declaration
on Aid Effectiveness are more and more important. For instance,
within joint donor budget support bsgroups the Bank has an important
role. This is obviously a trend which also concerns us because
the lack of progress of the Bank in some of the targets of the
Paris Agenda such as harmonisation, such as ownership, might spill
over into the donors that are joining into the Bank to look at
good example or as a leading partner at the country level. This
is to a lesser extent an issue of concern for those countries
which have a strong, expressed development policy, such as the
UK, but it is a greater threat for other donors which have a lower
profile in terms of development policy.
Q51 Chairman: You have mentioned
the role of the World Bank and the IMF as a partnership. Periodically
we get lobbied by the IMF, who say, "We are part of the development
process too and we see ourselves as assisting organisations working
together." But, as you, Jeff Powell said, the relationship
between different countries and the Fund and the Bank are different
according to where they are at. In addition to that, fundamentally
the IMF has to provide a clean bill of health for a country which
is receiving development assistance, yet DFID ministers and DFID
staff will often say to us, "Our objective is to try to get
development aid and assistance to poor people" almost regardless
of the quality of government—not governance but government—in
their country; in other words, if they can find a mechanism to
get it through, they will. But if the IMF says, "This country
is persona non grata, " then the Bank has to suspend
its activities in this country. What do you think the Bank should
do in that situation but, more to the point, what can DFID do
when they are faced with that situation? How do you think they
should deal with it?
Mr Powell: The difficulty is,
of course, that in the arrangements between the Bank and the Fund
the Bank is obliged to do so. In an ideal world, we would like
to see that decision-making process broken, where the Bank had
more flexibility to consider whether or not to take the IMF signal
or at least to consider different modalities to deliver its assistance.
If that were the case, you can think of some kind of postponement
period, et cetera. There are different ways it could be examined.
Certainly we are appreciative of the fact that DFID has stated
it will not, as from on high, take the signal from the IMF in
terms of the macro-economic health, whether or not a country is
"on track". But, as you say, that only covers their
bilateral assistance and their major contribution by IDA to the
multilateral channel is effectively cut off. I think this is where
the role for development oversight of the IMF is to some extent
falling through the cracks a little bit. There could be pressure
put on working across DFID and the Treasury to change the view
of the IMF, to change the role of the IMF in, particularly, low-income
countries. This is where we feel that the IMF's understanding
of the growth dynamic in a low-income country has shown itself
not to be appropriate for the realities that are needed, the flexibility
that is needed, the emphasis on fiscal policy space to allow a
dynamic growth path to be attained in the IMF. There was the Malan
report recently, looking at the collaboration between the Bank
and the Fund.[19]
It made some very useful suggestions which reinforced this call
that we have made to look again at whether or not the Fund signalling
role in low-income countries is effective or not, whether or not
the Fund lending role is appropriate, whether or not the Fund's
short-term, fairly expensive lending is in fact an appropriate
development finance method. But, despite that call from the Malana
report and many civil society groups, the response to the Malana
report from management was effectively, "Well, we will set
up a web portal so that Bank and Fund staff can better share information"—full
stop, so we are not satisfied with the response to that report
in terms of collaboration.
Q52 Chairman: That has partly answered
the next question as to the benefits or otherwise of removing
the link. From what you have said, you think that the link should
effectively be broken.
Mr Powell: Yes.
Q53 Chairman: The Committee is going
to Washington next week and spending time with the Bank. Rounding
off, and just briefly, if there were one question we should ask
or one statement we should give to Mr Zoellick, what would you
like it to be? We are meeting the IMF too, but let us just concern
ourselves with the World Bank.
Ms Molina: Definitely on conditionality
of policy. Executive directors plus Fund management—and
that includes President Zoellick—should agree to set up
independent monitoring, an explicit directive, so that in a year's
time from now there is objective yardsticks to measure whether
the World Bank has actually focused on conditionality.
Mr Hammer: I think the request
would be for Mr Zoellick to set out policy for the involvement
of parliaments in a very clear way and which is very separate
from the promotion of projects that the World Bank may want to
implement in a particular country, separating that from the strengthening
of capacity for parliamentary oversight. To set out a policy and
set out a plan for implementation over the next few years so that
we can see how dedicated the Bank really is to strengthening the
capacity for a lot of stakeholders to come into the process.
Q54 Chairman: Do you think they should
change the constitution on that? Because that is a slight inhibition.
Mr Hammer: I would have to look
at the Articles of Agreement. My feeling is that the argument
that some form of statutory or constitutional change will be necessary
is very often more defensive than necessary. I think there is
policy change possible within what is there.
Q55 Chairman: They have done things
which were unconstitutional anyway. Mr Powell, your final comment.
Mr Powell: The one issue to me
which captures a lot of what we have discussed today is: will
President Zoellick ensure that impact assessment becomes an integral
part of what the Bank does? I think that is important for us because
it addresses a lot of the concerns that there is pressure on social
and environmental safeguards, to roll those back, which can mean
damage to the most marginalised communities affected by Bank projects.
It addresses the distributional questions that were raised: area
we really adding value in terms of how we are reducing poverty
in these countries that we are going to? Finally, to me, is the
key link with the MDG question: Are we really using development
finance to help us reach these internationally agreed goals or
are we simply putting things somewhat blind into various projects
and proposals which come from our country staff? If not, how can
you justify not doing such impact assessments?
Chairman: Thank you, all three of you,
very much indeed. I think you will appreciate that we have a common
goal really, which is that we accept the World Bank is an institution
for development. Our objective is to try to make it deliver and
be effective. I think you have helped us to do that. The purpose
of this inquiry—because we have been to the World Bank and
we comment on the World Bank Annual Report on a regular basis—is
to spend a little bit more time and go into a little bit more
depth to see whether or not we can usefully increase the influence
the British Government has, frankly, in the World Bank, given
that we are an increasingly important contributor. That is justifying
a tiny bit of what we are doing. Your evidence has helped us.
If you have any further specific information which you think might
illustrate or amplify what you have said to us along the lines
we have discussed, that will be additionally helpful and we will
certainly be made use of when we are preparing our report. Thank
you very much indeed for coming in.
18 World Trade Organization Back
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Report of the External Review Committee on Bank-Fund Collaboration,
February 2007 Back
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