APPENDIX 2
Memorandum submitted by the Bretton Woods
Project
1. ABOUT THE
BRETTON WOODS
PROJECT
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. The Project maintains contacts with a wide range of civil
society groups interested in the Bank and Fund and produces newsletters
and briefings on current issues.
2. INSTITUTIONALISING
ACCOUNTABILITY
The Bretton Woods Project welcomes the fact
that the Secretary of State for International Development and
the Chancellor have established a regular procedure of setting
down on paper the UK Government's key objectives for each World
Bank/IMF Annual and Spring Meetings and holding meetings with
interested NGOs and faith-based groups. We also welcome the interest
of the International Development Committee in these issues and
the opportunity to feed in our concerns.
However, we believe that for proper scrutiny
of the World Bank and activities within it, the Committee should
seek to institutionalise the accountability of the Bank and the
UK's influential participation on the Bank's Board.
Limited progress has been achieved in terms
of transparency of the Executive Board of the World Bank. The
Board's schedule is now made public on the Bank's website. But
neither the votes, nor the minutes, of the Executive Board are
published. Transparency of the Board's operations is important
because it allows external stakeholders to see what issues were
discussed and who was involved, ie, transparency will help diminish
the opportunity for influential members to dominate the Board.
It will also reveal the quality of discussions and whether all
relevant interests are being taken into account.
The Treasury Select Committee, in its 2001 report
on the IMF, concluded:
"we share the view put forward by the Bretton
Woods Project that the [UK Treasury's Annual Report on the IMF]
should have been more forward looking and given greater detail
on the UK position on each area of the IMF's work. It remains
the case that even allowing for the publication of the annual
report, the actions of the UK and the Executive Board as a whole
remain opaque. Most notably neither the votes, nor the minutes,
of the Executive Board are published. We believe that, because
the Executive Board is the ultimate decision making forum of the
Fund, withholding this information limits our ability to hold
the Government to account for their actions at the Fund".[3]
Suggested actions:
(2a) The British Government should update
its now outdated Institutional Strategy Paper on the World Bank
and publish short annual reports indicating progress against the
objectives outlined therein and the opportunities for advancing
them further over the coming year.
(2b) The British government should press
hard for the publication of minutes of Board meetings and of statements
to the Bank's Executive Board. If necessary as an interim measure
the British government should unilaterally publish its statement
to the Board outlining the UK position on selected key decisions.
3. REBALANCING
WORLD BANK
GOVERNANCE
We welcome the fact that at this year's annual
meetings the British government again tabled the issue of inequitable
voice of developing countries in the World Bank and IMF and was
successful in obtaining language in the Development Committee
Communiqué calling for a paper to be produced on this by
next year's Spring Meetings. This is in line with the government's
2000 White Paper, "Eliminating World Poverty: making Globalisation
Work for the Poor" which included a commitment to work towards
a "stronger and more effective" voice for developing
countries in the international institutions. The details of the
UK government's proposals and the likely gains that can be made
in this area are, however, unclear.
The United Nations Development Programme, in
its Human Development Report 2002, raised concerns that
"the IMF and the World Bank will not be able to do their
job effectively if they remain tied to structures that reflect
the balance of power of the Second World War". It points
out that of the 184 member countries represented on the World
Bank's executive board only eight have their own Executive Director
(ED): China, France, Germany, Japan, Russia, Saudi Arabia, the
UK, and the US. Other countries are grouped into constituencies,
each one represented by one ED who is normally from the most economically
powerful country in the group. Thus Canada and Italy both represent
their constituencies, which means that all the G7 countries have
a representative on the Board: as do Belgium, the Netherlands,
Spain, Denmark, Australia and Switzerland. This leaves only eight
further seats for developing country representatives. The 45 sub-Saharan
African countries are represented by only two EDs.
The appointment of the next World Bank President
within the coming two years will be an acid test of whether the
Bank's governance is being rebalanced and an important decision
for the future of the institution. At present the system is simple:
the US government selects a US citizen to fill the post, a decision
which is rubber-stamped by the Bank's Board. After the fuss about
the selection of the IMF Managing Director in 2000 a number of
changes to make the system of Bank and Fund head appointments
more open and meritocratic were proposed. [4]But
little seems to have been agreed and further pressure is clearly
needed to ensure public confidence in the process of selecting
the most powerful appointees for these important public institutions
at a time when their legitimacy is in question in many places.
The language in the government's Globalisation White Paper was
encouraging:
"In all these institutions [IMF, WB, WTO],
the UK Government favours open and competitive processes for the
selection of top management. This could include a definition of
the competencies for the post, selection and search committees
and a clear process for taking the final decision, in which competence
would be put above considerations of nationality." [5]
But it is not clear how vigorously the government
is seeking to implement this pledge or how successful it is being
in negotiating with other countries.
Suggested actions:
(3a) The British Government should clarify
its proposals for increasing the voice of Southern governments
in the key decisions taken by the World Bank and IMF, whether
by reallocating constituencies and votes or by increasing the
resources and staff in developing country delegations, or both.
(3b) The British Government should clarify
how it is supporting the introduction of an open and meritocratic
process for selecting the next World Bank President.
4. BANK-SPONSORED
PROCESSES SHOULD
RESPECT EXISTING
INSTITUTIONS AND
POLITICAL CYCLES
Poor countries aspiring to debt relief and new
loans from the Bretton Woods Institutions are required to develop
nationally owned Poverty Reduction Strategy Papers. UNDP, as well
as a number of NGOs involved in the process, have repeatedly voiced
concerns about consultation, "national ownership" of
the strategies and the timeframe of the process. UNDP has argued
that "The three year time frame is too short to bring about
significant progress in poverty reduction. An automatic time frame
determined externally is not aligned with country programming
timetables".[6]
Suggested actions:
(4a) The British Government should seek to
make the time frame of PRSPs flexible and extendable to five years
or more. The next generation of PRSPs should be compatible and
coterminous with other national planning instruments.
(4b) Consultation processes should include
opportunities for examination by existing institutions, including
parliaments, parliamentary committees and local/regional bodies.
5. POVERTY AND
SOCIAL IMPACT
ANALYSIS: WHO
IS IN
CHARGE?
The Bank, under pressure from some UK NGOs and
the British Government, has announced the introduction of Poverty
and Social Impact Analysis (PSIA). This is intended to clarify
the likely poverty impacts of proposed policies to help foster
an informed national debate and make explicit and accessible the
economic logic underpinning policy proposals. The intentions of
this approach are welcome. But it is still unclear what PSIA will
amount to. Will PSIA's impact be limited to changing the timing
or sequencing of reforms, or will it encourage a first principles
examination of what are the appropriate policies? Will PSIA be
conducted in an open and participatory manner genuinely designed
to help civil society groups engage in debates about policy options,
or will it be a narrow extension of traditional World Bank technical
approaches to understanding poverty and planning policy responses?
Will the Bank reduce the overall number of studies it conducts
in borrower countries? [7]
Ministers in the HIPC Finance Ministers Network
(of ministers from 33 Heavily Indebted Poor Countries) recently
urged the World Bank and IMF to "dramatically accelerate
PSIA in HIPCs, [since] analysis of the links between macroeconomic
and structural policies and poverty reduction remains among the
weakest areas of most PRSPs". They were clear, however, that
they did not mean that the World Bank and IMF should do more,
or different, studies. They argued that "it is essential
to equip countries with the tools to conduct their own PSIAs rather
than depending on outside assistance. These tools should have
input from the Bretton Woods Institutions and donors, but be administered
and disseminated by independent capacity-building sources, to
avoid conflict of interest for partners in the negotiation process
of PRGF and PRSC [Poverty Reduction Support Credit] frameworks".
The heads of the IMF and World Bank replied
saying that they understood "the need for a broader and deeper
discussion with all stakeholders of macroeconomic frameworks and
policies, including on current policy choices and trade-offs.
A concerted international effort will be required to assist the
countries in undertaking more systematic PSIAs of major policies.
The Bank and the Fund in cooperation with other partners are committed
to help provide the necessary technical and financial support".
This raises important questions of who will fund, commission and
carry out this work, but implies that the Bank and Fund have accepted
in principle the need for it to be done independently, not by
themselves.
Suggested actions:
(5a) The Bank's role as a commissioning agent/controller
of multiple in-country studies should be reduced. Such studies
should be commissioned by governments and directed by a multi-stakeholder
steering group, including representatives from government, parliament,
civil society, and donors.
(5b) PSIA should assess, and present in an
accessible manner, findings on a range of different policy options,
so that the best policies can be selected.
(5c) A timetable summing up which country
studies are to be carried out, by when and by whom should be published
to aid interested parties tracking policy formulation.
6. THE WORLD
BANK AND
TRADE CAPACITY-BUILDING:
"CORNERING THE
MARKET"?
Despite acknowledging that rapid or poorly planned
trade liberalisation can have negative impacts on the poor, the
Bank continues to push developing countries towards unilateral
liberalisation. This thrust may contradict national poverty reduction
plans or, at the very least, undermine ownership; furthermore,
it threatens to weaken negotiating positions in the WTO.
We support calls from both the UK government
and the World Bank to integrate trade strategies into PRSPs; however,
any such integration must first examine the poverty impact of
proposed reforms, and allow for a diversity of trade strategies
which take into account development needs.
Due to pressure to abandon what Bank economists
have termed the "politically incorrect" loan conditionality,
the Bank has turned to influencing trade policy via trade-related
capacity building. This strategy coincides both with the Bank's
repositioning as a provider of development knowledge and the pivotal
role which capacity building has been set up to play in keeping
trade liberalisation moving forward to the next round of multilateral
trade talks in Mexico in 2003.
We welcome the UK government's increased support
for trade-related capacity building. However, there are at least
two reasons why the Bank's increasing role should be checked.
First, is the risk of upstream conditionality.
With its size, reach and resources, the Bank's role in coordinating
capacity building will result in an intellectual straitjacket
being thrown over the entire trade policy processfrom the
choice of research areas and how that research is conducted through
to the shape of trade-related institutions and the training of
trade negotiators themselves.
Secondly, the Bank's lead role in mainstreaming
trade into PRSPs via the Integrated Framework (a multi-agency
initiative to provide trade-related capacity building to the least
developed countries) offers the opportunity to lock the trade
liberalisation agenda into national development plans of the most
vulnerable countries. [8]
Suggested actions:
(6a) Trade-related loan conditions should
not be imposed by the World Bank and IMF;
(6b) PRSPs should examine the poverty impacts
of existing and proposed trade policies;
(6c) The Bank should return to its mandated
role of funding rather than carrying out trade capacity building.
In its place a diversity of UN, intergovernmental, non-governmental
and private sector agencies should be bolstered. Support should
be given to developing countries to allow them to direct the capacity
building agenda. This should include support for the participation
of both the private sector and civil society groups in monitoring
and the implementation of capacity building exercises.
7. CONCLUDING
REMARKS
The Bretton Woods Project welcomes the interest
of the International Development Committee in these issues and
is ready to provide further information, analysis or contacts
in writing or in person at any time.
We would also urge the Committee to develop
further direct links with equivalent committees in other countries.
The complex and demanding job of scrutinising the World Bank,
an extremely important and powerful global institution, will be
made much easier if elected representatives do more to share views,
reports and approaches directly. We are convinced that your colleagues
in other parliaments, particularly those of the weaker member
countries, would feel greatly empowered to develop more systematic
links with representatives of the stronger ones, such as the UK.
Related recent publications from the Bretton Woods
Project:
Blinding with Science or encouraging debate?
How World Bank analysis determines PRSP policies,
http://www.brettonwoodsproject.org/topic/adjustment/a30blinding.htm
Cornering the Market: The World Bank and trade
capacity building,
http://www.brettonwoodsproject.org/topic/knowledgebank/k30cornering.htm
International financial institutions governance,
transparency and accountability
http://www.brettonwoodsproject.org/topic/reform/index.html
Bretton Woods Update, http://www.brettonwoodsproject.org/update/index.html,
bi-monthly online and in print.
Bretton Woods Project
October 2002
3 <au0>www.publications.parliament.uk/pa/cm200001/cmselect/cmtreasy/162/16205.htma3<xu Back
4
See: <au0>www.brettonwoodsproject.org/action/imf/letter.html<xu Back
5
Eliminating World Poverty: Making Globalisation Work for the Poor,
p. 100. Available at: <au0>http://www.globalisation.gov.uk<xu. Back
6
UNDP review of PRSPs, December 2001 <au0>www.worldbank.org/poverty/strategies/review/undp1.pdf<xu Back
7
For a listing of the 21 study types routinely carried out by the
Bank in member countries, see Blinding with Science or Encouraging
Debate? How World Bank Analysis Determines PRSP Policies, Bretton
Woods Project and World Vision International, 2002, p. 13. Available
at: <au0>http://www.brettonwoodsproject.org/topic/adjustment/a30blinding.htm<xu Back
8
See: Cornering the Market: The World Bank and trade capacity-building.
Bretton Woods Project, 2002. Available at: <au0>www.brettonwoodsproject.org/briefings<xu Back
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