2006/09/19

World Bank Profits From Poor Countries - Report

Anil Netto
Inter Press Service (IPS)

SINGAPORE, Sep 19 (IPS) - The World Bank receives more from developing countries than what it disburses to them says a new report released Tuesday as finance ministers endorsed a controversial new Bank plan to tackle corruption in developing countries.

The Social Watch Report 2006, released here at the annual meetings of the Bank group and the International Monetary Fund (IMF), stressed the need to reform the current international financial structure. Net transfers (disbursements minus repayments minus interest payments) to developing countries from the Bank and the International Bank for Reconstruction (IBRD), have been negative every year since 1991, the report pointed out.

The IBRD is now not making any contribution to development finance other than providing funds to service its outstanding claims. The International Development Association (IDA), which provides interest-free credits and grants to the poorest developing countries to boost their economic growth, is the only source of net financing from the Bank.

But these disbursements amount to only 4-5 billion US dollars a year. Taken together, the contribution of the Bank to the external financing of developing countries is negative by some 1.2 billion dollars, thus ‘‘failing to fulfil the purpose of its mission'', said Social Watch, an international network of over 400 citizens' organisations in 60 countries monitoring commitments to eradicate poverty.

Meanwhile, critics say the Bank has embarked on a public relations offensive using the good governance and poverty eradication rhetoric to mask its unpopular neo-liberal agenda of ‘deregulation', privatisation, and removal of government subsidies for essential services.

Good governance is not an end in itself, but the foundation of the path out of poverty, said Bank group president Paul Wolfowitz in his address to the annual meeting of the Board of Governors on Tuesday. ''It leads to faster and stronger growth. It ensures every development dollar is used to fight poverty, hunger and disease.'' Wolfowitz said that governance, a ‘‘much broader concept than anti-corruption'', was aimed at poverty reduction and would not be used as a new conditionality for lending.

‘‘Governments are the key partners of the bank in governance and anti-corruption programmes, while, within its mandate, the Bank should be open to involvement with a broad range of domestic institutions taking into account the speficities of each country,'' said the Development Committee of the IMF and the Bank in a communiqué on Monday. It added that ''country ownership and leadership'' are key to successful implementation.

Yet, it was country ownership and (previous) leadership that were responsible for the Bank's complicity with corrupt regimes in the past. In the case of Indonesia, the Bank poured some 30 billion US dollars over 30 years into the coffers of the dictatorial Suharto regime. It tolerated a significant siphoning off of its aid funds, turned a blind eye to blatant rights violations there and helped to legitimise the regime. When Suharto was eventually toppled, the credibility of the Bank's good governance rhetoric nosedived.

Critics say the Bank's demand for greater transparency would have better credibility if the Bank were to improve its own transparency, carry out a thorough audit of its projects, and provide full support to whistle-blowers. A former Bank staffer, who declined to be identified, expressed doubts to IPS over the practicality of the Bank's new anti-corruption guidelines. ‘‘How are they going to put their anti-corruption teams together? Are they going to be consultants or Bank staff or civil society groups?''

Some say an excessive focus on anti-corruption is simplistic and the desirable goals of good governance may be neither necessary nor sufficient for boosting development. ‘‘Our analysis seriously questions whether the governance agenda can be interpreted as a precondition for development rather than being a list of important and desirable objectives,'' said Mushtaq Husain Khan, a professor of economics, in a paper presented to a G24 briefing here, last week.

There was a real danger that the strong structural drivers of corruption are not being properly understood, he warned: ‘‘The desire to link lending and partnership with developing countries on the basis of small differences in governance and corruption indicators is seriously misguided according to our analysis.''

Reforms at the Bank would also have to address its extremely skewed voting structure that, like the IMF's, favours richer nations. The U.S. and Japan, for instance, each have one executive director with 16 and 7 percent voting powers respectively. Africa, on the other hand, has three executive directors (representing 53 countries), one of whom has less than two percent voting power while the other two have three percent each.

Though developing countries have very little power in decision-making, they are the ones that have to largely finance the administrative costs of both institutions through interest and other charges on loans, according to Social Watch. The Bank's prescriptions meanwhile have generally focused on economic work in developing countries that benefits large private firms rather than meaningful practical policies that empower the grassroots poor.

Its big-ticket projects have had disastrous effects in some of these countries and generated much grassroots resentment. Farmers in developing countries have blamed the Bank for pushing for privatisation, ‘deregulation' and ‘liberalisation' through numerous conditions attached to its loans.

In Sri Lanka, for example, development banks such as the Bank have advocated cutting subsidies on fertilisers and seeds, privatising state fertiliser manufacturing industries and seed farms, and selling off stores, mills and retail outlets. They have also attempted to introduce charges for irrigation water and to remove restrictions on the lease and sale of land given to farmers under government grants, triggering a deep crisis in the paddy sector.

"The World Bank is destroying our traditional agricultural systems and our livelihoods" said D R Jayatilake of the Movement for National Land and Agricultural Reform in Sri Lanka. "This is why we are telling the Bank and the IMF to get out of our countries.'' Peasant movements, especially in Latin America and Asia, have also struggled against World Bank land reform policies.

''The World Bank is promoting ‘market assisted land reform','' said Henry Saragih, general coordinator of La Via Campesina, the international peasants' movement. He said this was done through a process of privatisation of land markets, which distributes land to the rich who can pay for it. He noted that agribusiness firms are getting more powerful while small farmers have less access to land. ‘‘Farmers consider land as a source of livelihood, culture and community life and not as a commodity,'' he said.

In many countries, Bank-funded projects have evicted rural communities from their land, benefiting transnational companies and marginalising local communities. For decades, peasants and indigenous communities have opposed mega projects funded by the Bank such as the Pak Mun Dam in Thailand and the Kedung Ombo Dam in Indonesia.

The bias in the process begun by the Bank on good governance is interventionist, said the Latin American Network on Debt, Development and Rights (LATINDADD) in a pronouncement distributed at the Singapore meetings. In seeking to carry out judicial reform, combat corruption, and promote reforms in public administrations, the World Bank ‘‘intervenes in democratic state institutions (judiciary, executive and legislative branches and control bodies) promoting market mechanisms in public administrations that facilitate transnational investment.'' (END/2006)