Select Committee on International Development Appendices to the Minutes of Evidence


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 process—from 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


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2003
Prepared 13 January 2003