The Social Justice Committee summary of issues of concern as the World Bank and IMF prepare for their Annual Meetings in Washington October 20-22 2007, and recommendations provided to the Government of Canada
1. Overview and recommendations
2. IMF and World Bank Reform – lack of movement on voice and representation, and on the selection process for leadership at the World Bank and IMF
3. The Independent Evaluation Office report on the IMF in Africa - “business as usual”
4. Liberia debt to the World Bank and IMF
5. Declining and less-than-effective MDB spending on HIV/AIDS
6. World Bank weak on labour standards and worker protection
7. Concern that policy choices on women’s health and climate change are guided by US government ideology
1. Overview and recommendations
The Social Justice Committee of Montreal remains concerned about the scope and pace of reform of the World Bank and IMF. There has been no movement to strengthen the “voice” of small and poor countries despite the commitments made a year ago in Singapore, and the selection process for the leaders of these institutions remained closed. The case of Liberia drags on as this heavily indebted country in post-conflict recovery remains unable to get debt relief from the World Bank and IMF. NGO reports have described problems in HIV/AIDS spending, the problem of wage ceiling restrictions imposed by the IMF, weakness in the World Bank’s commitment to core labour standards, and policy direction at the World Bank inappropriately influenced by a Wolfowitz appointee.
In all of these, the level of engagement or response by the Canadian government and its representatives at the institutions is difficult to assess. The exception is the prompt and positive response by World Bank Executive Director Samy Watson to NGOs concerned with possible setbacks in Bank policy on women’s health.
Canadians must be better informed about the extent to which their representatives are pressing for positive action at these institutions, and how they respond to calls for reform - including greater accountability, transparency, debt relief and respect for human rights. The Social Justice Committee recommends that the government increase its reporting on activities at the Bretton Woods Institutions beyond the annual Report to Parliament. More frequent, focussed updates are needed if the Canadian public is to be informed about Canadian priorities and activities in these institutions.
We recommend that the Department of Finance and/or the offices of the Executive Directors provide regular brief reports on activities and priorities at the World Bank, IMF and Inter-American Development Bank.
2. IMF and World Bank Reform – lack of movement on voice and representation, and on the selection process for leadership at the World Bank and IMF
* Voice of small and poor countries
We remain concerned with the lack of progress in World Bank and IMF efforts to reform governance structures to enhance “voice” of small and poor countries.
As the World Bank study Voices of the Poor: Can Anyone Hear Us? concluded in 2000, “the experiences of poor people are characterized by lack of power and voicelessness. In these circumstances promotion of voice and empowerment of poor people become the central tasks of development policies and agencies.”
The concern about voice goes beyond reform of vote and quota, and includes aspects of Poverty and Social Impact Assessments, for example, and other elements of program and policy design that have the potential to build local “ownership” and improved response to local needs.
* The selection process for leadership at the World Bank and IMF
The recent changes in leadership of the IMF and World Bank were not through fair and open processes. The failure of the institutions to follow the guidelines that were developed in 2001 for a clear and open process is symptomatic of a larger crisis of accountability in the IFIs.
Rather than press for a better process, as it had committed to do in discussions with NGOs in 2006, the Canadian government was especially eager to voice its support for the nominee of the US administration. The process for selecting the World Bank president ignored completely the recommendations of the Draft Joint Report of the Bank Working Group to Review the Process for Selection of the President and the Fund Working Group to Review the Process for Selection of the Managing Director (April 25, 2001), which included recommendations for a clear and open process guided by an Advisory Group. The process for selecting the MD of the Fund was only slightly better than what took place at the Bank.
3. The Independent Evaluation Office report on the IMF in Africa - “business as usual”
The IMF Independent Evaluation Office report An Evaluation of The IMF and Aid to Sub-Saharan Africa identifies its main finding quite clearly: “Underlying the theme of disconnect is a larger issue of attempted—but ultimately unsuccessful—institutional change.” And concern that “in the face of a weakening consensus in the Board and a staff professional culture strongly focused on macroeconomic stability—and, most important, changes in senior management and a resulting lack of focused institutional leadership and follow-through—the IMF gravitated back to business as usual.”
The continued focus on conservative fiscal and monetary policy in the absence of effective social analysis to provide context continues to result in flawed policy recommendations. This is exacerbated by continued reluctance to consider alternatives or to support country ownership on a level where it would be effective.
The report also recognized the concern that the IMF diverts aid finances into foreign reserve holdings, thus depriving areas of social welfare of funds because of conservative monetary priorities. It emphasized the need for broader communication and dialogue in setting these priorities.
The recommendations in the report are helpful, but we consider the IEO’s concern that “staff will revert to their macro silos—business as usual—with adverse implications for the quality of their work and for the policy advice they can provide to Sub-Saharan African countries” to be valid, given the reluctance thus far to implement reforms that provide for broader consultation, communication and transparency, and monitoring and evaluation.
The Fund is not a development organization, nor should it acquire a greater role in affecting social spending. But neither should it conduct economic policy analysis in the absence of social analysis, including consideration of social analysis such as the World Bank’s Poverty and Social Impact Analysis (although these are themselves need improvement, since they can be too limited in scope and/or too late to be of value, or serve to rationalize pre-determined policy choices).
4. Liberia debt to the World Bank and IMF
Given the critical situation in Liberia as it moves forward in its post-conflict recovery, and the context of heavy indebtedness, immediate action to cancel debts to the World Bank and IMF is needed. A moratorium on debt service payments should be one of the options considered.
For more than two decades, Liberia has been overwhelmed with armed conflict and violence. It was only in 2003 that peace was realized in the country, but at the price of 250,000 casualties and hundreds of thousands rendered homeless out of a population of only 3 million. In 2005, the Liberian nation democratically elected a new government; a government that would not only be faced with the duty of rebuilding the country, but also with the task of repaying the $3.7 billion dollars of US in external debt that was incurred in large part during the conflict.
It is impossible for Liberia to pay this external debt, and the task of working to pay off the debt works to contradict the government’s duty to rebuild the nation. Liberia is struggling with post-conflict reconstruction in the context of an 80% poverty rate, a 76% illiteracy rate, and an 85% unemployment rate, while paying off an external debt that is equivalent to 800% of its GDP, or 3000% of its exports. Additionally, having to pay back the external debt that was incurred by Liberia’s former violent governments negatively affects the legitimacy of the current government, making it harder for this government to move forward with development projects.
Although the need for debt cancellation is apparent, Liberia does not currently qualify for HIPC Initiative assistance. Although Liberia currently has an IMF Staff Monitored Program, it must agree to the conditions of permanent IMF and World Bank programs, and must have developed a Poverty Reduction Strategy Paper (PRSP) in order to qualify. If Liberia does agree to such programs, and is able to make sufficient progress in introducing reform and sound policies through such programs, the international financial community will agree to reduce the debt to an agreed sustainability threshold.
At this point, Liberia will receive what is called interim relief, but will still not qualify for the full and irrevocable reduction in debt that the HIPC Initiative offers. In order to reach what is called the completion point, Liberia must establish a track record of good performance under IMF and World Bank programs, it must implement further key reforms outlined by such financial institutions, and then it must adopt and implement its PRSP for at least one year.
The process of attaining HIPC Initiative assistance is complicated and time-consuming. Potential IMF reforms that could be imposed on Liberia include the stabilization of exchange rates, reform of state-run enterprises, restructuring of corporate tax rates, land reform, and measures to keep inflation low. This could result in the reduction of Liberia’s currency value, the size of its bureaucracy, and social spending on health care, education, and other such institutions. Accordingly, the rates of unemployment, homelessness, and illiteracy are likely to go up for Liberia in the short run, and the popularity and stability of Liberia’s newly elected government will be jeopardized.
Not only are the implementation of IMF reforms and policies likely to be difficult and increase short-term poverty, the completion of the HIPC initiative will be anything but immediate. Zambia took over 10 years to reach the completion point under this initiative, as did Burundi and the Central African Republic. In fact, the fastest country to reach such a point was Uganda, which took 6 years to complete the process. Accordingly, Liberia’s urgent need for instant debt relief will be disregarded under the HIPC Initiative and the poverty and unemployment that has contributed to this need will in fact increase during the next several years that Liberia will have to wait for assistance.
The HIPC Initiative is a much-needed program for countries like Liberia that are faced with unmanageable debt. The problem is that the HIPC Initiative is currently failing to provide Liberia with the assistance needed for its development and democratization. If such an initiative is to actually fulfill its objectives in the case of Liberia, it must be done immediately.
5. Declining and less-than-effective MDB spending on HIV/AIDS
The Social Justice Committee is concerned that spending on reproductive health and HIV/AIDS has been found to be declining. A recent report by Gender Action, a US NGO, describes how World Bank funding in these areas declined from US$2.3 billion in 2003 to $2.1 billion in 2006. Bank funding for HIV/AIDS programs declined from $1.3 billion in 2004 to $790 million in 2006.
Excerpts from “Mapping Multilateral Development Banks’ Reproductive Health and HIV/AIDS Spending” by Gender Action, Sept. 2007:
“Despite firm commitments by all MDBs to achieving MDG reproductive health and HIV/AIDS targets, we identified a recent decline in World Bank spending and dearth of other MDB support for reproductive health and HIV/AIDS.
Individual MDBs also have different emphases on reproductive health and HIV/AIDS. The ADB focuses nearly entirely on HIV/AIDS projects. Reproductive health projects and components dominate the portfolios of the World Bank and AfDB. The AfDB provides very little funding for HIV/AIDS projects and components despite the HIV/AIDS crisis afflicting many African countries. While most of IDB projects are dedicated technical assistance grants, a few large health loans with reproductive health components compose the bulk of IDB spending on reproductive health and HIV/AIDS.
Our qualitative analysis revealed a wide range of gender sensitivity within MDB projects, but the majority of projects fail to integrate gender issues. Many projects describe the plight of women or discuss gender inequality, but fail to identify mitigating actions.
The World Bank was the largest MDB funder addressing these two challenges; from 2003-2006 the World Bank approved $7.2 billion for reproductive health and HIV/AIDS projects and components. World Bank funding amounts declined from $2.3 billion for projects and components in both sectors in 2003 to $2.1 billion for the same in 2006. World Bank funding for HIV/AIDS projects and components dropped from $1.3 billion in 2004 to $790 million in 2006.
The African Development Bank (AfDB) was the second largest MDB funder, but, despite the devastating HIV/AIDS pandemic affecting many African countries, the AfDB provided merely $44 million for HIV/AIDS projects and components from 2003-2006 compared to $108 million for reproductive health over the same period.
The Inter-American Development Bank (IDB) provided $76 million in loans and grants for reproductive health and HIV/AIDS between 2003 and 2006.
Asian Development Bank (ADB) investments in reproductive health and HIV/AIDS from 2003 to 2006 total $48 million and concentrate mostly on grants for HIV and AIDS.
These investments averaged less than one percent of spending at the AfDB, ADB and IDB, and less than six percent at the World Bank from 2003 to 2006. As we explain further below, this Word Bank data is highly inflated.
We reviewed a sample of MDB reproductive health and HIV/AIDS projects to assess their quality, especially their gender sensitivity. Overall, the quality of these investments was disappointing with only a handful of projects addressing gender issues despite the critical importance of gender roles in reproductive health and HIV/AIDS.
Most projects focused solely on women, overlooking men’s involvement in reproductive health and rights and HIV/AIDS prevention and treatment. Furthermore, most MDB population projects focus primarily on maternal health and lack attention to reproductive and sexual health and rights. Compounding lack of gender sensitivity in MDB projects is their unsustainability caused by endemic MDB project shortcomings including short-term project duration and lack of funding for recurrent expenditures such as salaries for doctors and nurses.
We also found that different MDBs have differing styles of investment. During 2003-2006, the majority of reproductive health and HIV/AIDS projects funded by the IDB and ADB were dedicated projects funded through technical assistance grants. In contrast, since World Bank and AfDB investments in reproductive health and HIV/AIDS are often components of larger projects, tracking their exact investments in reproductive health and HIV/AIDS is a formidable challenge. These two banks mostly provide loans with a relatively small proportion of grants.
6. World Bank weak on labour standards and worker protection
There is some progress in integrating rights assessments into World Bank programs, although these have been limited. One area of progress has been in core labour standards, but the view that labour standards and regulations are impediments to business continues to prevail.
The recognition and protection of core labour standards is but one aspect of a rights-based approach to development. The continuing need to build country ownership in development and democratize decision-making processes requires greater attention to the full range of rights as identified in international law, including economic, social and cultural rights.
The Social Justice Committee is concerned at the apparent lack of commitment in the World Bank to the protection of labour standards, as identified by the ITUC (International Trade Unions Confederation)/Global Unions.
Excerpts from the Statement by the ITUC (International Trade Unions Confederation)/Global Unions to the 2007 Annual Meetings of the IMF and World Bank (Washington, 20-22 October 2007):
The steps taken by the World Bank to ensure that the activities it finances do not violate Core Labour Standards (CLS) are undercut by the Bank’s most widely circulated publication, Doing Business, which promotes the view that labour standards have no beneficial impact but should only be seen as possible impediments to investment because they may increase the cost of doing business.
In its 2006 and 2007 editions, Doing Business granted the status of best performer for their labour regulations to two countries that are among the handful of states that are not members of the ILO. These two small countries, Palau and Marshall Islands, have almost no labour regulations of any kind and, as non-ILO members, are not required to abide by the CLS.
Doing Business grades and ranks countries according to whether they have various kinds of worker protection rules – ranging from limitations on hours of work, to minimum wages and requirements for advance notice of dismissal – and encourages countries to improve their ranking by eliminating these regulations. Countries can only improve their “rigidity of employment” and “firing cost” indices, so as to improve their overall Doing Business ranking, by eliminating worker protection regulations. Despite the fact that many World Bank Group loans now include CLS requirements, no points are given for abiding by these standards. As a result, such regular violators of fundamental workers’ rights as Bangladesh, Belarus, China, Colombia, El Salvador, Eritrea, Oman, Saudi Arabia, Swaziland and Uzbekistan all receive better Doing Business rankings for “Employing Workers” than do most countries of Western Europe.
Georgia is furthermore praised by Doing Business 2007 as the world’s “top performer” because of its “most far-reaching reform of labor regulation”. Doing Business neglects to mention that Georgia refused to consult the social partners on this reform and rejected advice from the ILO, part of which concerned problems with the reform measures’ compatibility with ILO Conventions 87 and 98, two of the CLS conventions.
According to the authors of Doing Business, countries need to get rid of worker protection rules so as to make their economies more investment-friendly and enhance employment creation (the subtitle of Doing Business 2006 was “Creating Jobs”). No serious economic evidence is cited to justify the assertion that countries that receive good scores in terms of their “Employing Workers” ranking deliver higher income, increased productivity and improved employment creation. In fact, a perusal of the Doing Business rankings demonstrates the implausibility of the claimed identification of a link between deregulated labour markets as measured by Doing Business and improved economic performance.
7. Concern that policy choices on women’s health and climate change are guided by US government ideology
Two lesser-known issues involve one of Wolfowitz’s hand-picked deputies, the Bank’s Managing Director Juan Jose Daboub. Daboub is the former finance minister of El Salvador. He has alleged links to Opus Dei and is a member of El Salvador’s right wing ARENA party, which oppose contraception and equal rights for women. Daboub is a supporter of the Bush administration’s anti-family planning and abstinence policies, which have proven ineffective and unsuited to the needs of many in developing countries.
* Women’s health
In May, it was revealed that Daboub sought to remove all references to family planning from the Country Assistance Strategy (CAS) of Madagascar, despite a strong request by the Madagascar government to include these services as a core component of World Bank support for its health sector.
Daboub also instructed his staff to eliminate references to family planning and reproductive rights from the World Bank’s new Health, Nutrition and Population strategy (HNP). CAS’s are developed using this global strategy. The previous HNP, drafted in 1997, identified lack of access to family planning services as a primary health challenge and identified this area as a priority for World Bank Country Assistance Strategies.
“Removal of these references would have had a dramatic impact on funding programs that address sexual and reproductive health,” Serra Sippel of the Centre for Health And Gender Equity said.
According to the World Bank website, there are approximately 75 million unplanned pregnancies every year, one-third of which result in unsafe abortions.
“This effort to deprive impoverished women and men in poor countries of the freedom to control their family size, while condemning women to unwanted pregnancies and unsafe abortions, is unthinkable in a public health program prepared by a development institution,” Bea Edwards, Government Accountability Project international program director, said.
In a letter to his staff, Daboub claimed that “none of the editorial changes that were made at my direction changed, or intended to change, the Bank Group's program in the area of family planning. There has been no change to the Bank’s policy on family planning.”
However, the omissions and changes to the strategy were then strengthened by U.S. Executive Director to the Bank's board, E. Whitney Debevoise, who also sought to insert the phrase “age appropriate access to sexual and reproductive health care”. This addition would have denied young women in developing countries access to these services, the population who needs them most. Devbevoise also sought to change “reproductive health services” to “reproductive care”, and “reproductive rights” to “reproductive health”. The change from “services” to care would have had a dramatic impact on funding programs that address sexual and reproductive health, and the elimination of the world rights denies to women the world over that proper reproductive care is something they deserve and are entitled to.
“This (U.S.) administration has used sexual and reproductive health issues on a global level to throw a bone to right wing in the US. To them, women’s lives in developing countries are totally expendable,” Sippel said.
* Climate change
In February 2006, Daboub tried to water down references to climate change in an environmental strategy paper. In the paper, World Bank officials were asked to “refocus” their clean energy investment framework, and “shift from a climate lens to a clean energy lens”. All references to climate change were taken out of the strategy paper and replaced with “climate risk” or “climate variability”.
This despite acknowledgment on the Bank’s website that “developing countries and particularly the world’s poorest people would be the ones most harmed by changes of climate and extreme weather events such as floods, droughts, heat waves, and rising sea levels.”
As GAP’s international policy director Edwards says, this was “yet another example of Mr. Wolfowitz’ attempt to align Bank policy with the ideological positions of the Bush administration.”
The Social Justice Committee is concerned with these examples of the intrusion of the US administration into World Bank policy in ways that seek to by-pass more open processes of policy formation.
The Social Justice Committee
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