“Other financial institutions that followed the bank in building up their standards … will now follow the bank in tearing them down,” a global development watchdog worries.
WASHINGTON — A bitter dispute has broken out in recent weeks following the release of proposed changes to World Bank policies aimed at safeguarding local communities and environments.
A draft of the proposed reforms, released at the end of July, follows a half-year of consultations in some 40 countries. Yet civil society groups around the world have responded with concern and even indignation at many of the proposed changes, warning that the new proposal includes multiple loopholes that could hollow out what have long been seen as pioneering policies.
“This draft effectively winds back the clock to the 1970s, before the Bank had binding policies in place to protect the poor and the environment,” Madhuresh Kumar, an organizer with the National Alliance of People’s Movements in India, said in a statement. Kumar’s organization is one of more than 100 formally complaining that the new proposal “fails to adequately respond to or incorporate years of input from civil society and experts around the world” and calling for “major revisions.”
The World Bank Group, based here in Washington and consisting of multiple agencies, is the world’s largest development institution. During the past fiscal year alone, the bank’s support for developing countries totaled some $61 billion, a significant rise from the previous year. That included more than $22 billion in various types of projects and lending through its fund for the world’s poorest countries.
All of that lending is subject to a series of rules aimed at ensuring that World Bank-funded projects do not inadvertently harm local communities or environments. Part of the aim of the new review, which began in 2012, has been to clarify exactly where various responsibilities lie in carrying out and complying with those various regulations. And in terms of offering such clarity, the draft proposal is being seen as successful.
According to multiple analysts, however, the broad effect of the new safeguards review appears to be a shift in responsibility away from the World Bank and instead toward borrowing governments themselves.
“The weakening would mean that it is harder for people harmed by the bank’s operations to hold the bank accountable for harm through its complaint offices,” Natalie Bridgeman Fields, executive director of Accountability Counsel, a legal advocacy group, told MintPress News.
The shift could also include offering borrowers increased flexibility in applying the bank’s own rules. While even critics say that certain areas of the safeguards have been strengthened under the proposal, they maintain that most of this bolstering would be rendered irrelevant by the introduction of a series of new loopholes.
“There are caveats for everything. There appears to be very little that’s set in stone, as a rule that must be followed,” Joshua Klemm, coordinator of the safeguards campaign at the Bank Information Center, a Washington group that advocates on behalf of civil society concerns around the World Bank, told MintPress.
“The overall impact of these changes is a shift away from a rules-based system, where opportunities for local communities to understand the risks and have a say are predictable. After all, local communities are supposed to be the ultimate beneficiaries.”
One such loophole that has received significant attention since the draft was released involves the bank’s widely lauded safeguards around indigenous peoples.
On the one hand, the reforms would introduce new requirements around what’s known as free, prior, informed consent for indigenous communities. Such rules would aim to ensure that these groups are given adequate opportunity to hear about and understand the details of a project proposal and its implications.
On the other hand, the new proposal offers governments multiple opportunities to sidestep these requirements. If borrowing governments express concern that identifying indigenous groups for this purpose could exacerbate “ethnic tension or civil strife,” or if so doing is deemed “inconsistent” with a country’s constitution, government officials are allowed to request an “alternative approach,” according to the draft text.
That proposal has outraged indigenous rights groups. A letter dated July 29, signed by over 100 groups and individuals, calls detailed attention to what it dubs “the dilutions to the current safeguard policies.”
“The World Bank’s intention to allow our governments, which have marginalized our communities for decades, to decide whether we are indigenous would severely undermine our fundamental human rights and weaken the limited protections we currently have,” Adrien Sinafasi, an indigenous activist in the Democratic Republic of the Congo, said in a statement.
Although bank officials were unable to comment for this story, the institution has pushed back repeatedly against such criticisms in recent weeks.
“The proposed alternative approach [on indigenous peoples] would only be used in exceptional circumstances, and only if the Bank is convinced that it is necessary,” a fact sheet on the institution’s website states.
“The Bank will require a detailed procedure to be followed. This procedure will include consultations with the affected Indigenous Peoples. The World Bank will have sole responsibility for deciding whether the approach can be used.”
Further, the fact sheet immediately addresses whether the new draft proposal (what it refers to as the Proposed Framework) constitutes a “dilution” of the current safeguards.
“The Proposed Framework … focuses on the importance of a robust environmental and social assessment, the ongoing identification and management of risks and impacts, and the application of mitigation measures in a timely way to protect the environment and people,” the bank states at the very beginning of the document.
“The aim of the new approach is to achieve better implementation of projects and a more targeted and efficient use of resources, with importance being given to managing environmental and social risks and impacts during the implementation of the project.”
The overall impact, the bank says, “will be to strengthen the management of environmental and social risk.”
Race to the bottom?
It was only after several decades of existence that the bank’s management moved to institute specific policies aimed at mitigating any environmental or social harms that may come from its lending. However, by the early 1980s, it had became the first international development agency to do so.
Given the institution’s focus at the time on large-scale infrastructure projects — mines, hydropower projects, roads, etc. — its first such policy was a directive on involuntary resettlement. These rules came about in reaction to rising complaints by local communities regarding World Bank-funded mining operations.
The directive thus delineated clear rules under which World Bank projects were to operate. Beyond this, however, the guidelines also had the effect of clarifying when and how local communities could respond if they had complaints surrounding resettlement processes. They also more clearly vested responsibility for a project’s local impacts with the bank itself.
Since then, the World Bank has expanded these safeguards to cover concerns around forests, dams, cultural resources and indigenous peoples, among other issues. Indeed, the bank’s lead in this regard has resulted in the adoption of similar guidelines by nearly all multilateral financiers and major donor governments. Others have gone even further, building on the institution’s safeguards to draft what many see are now even stronger regulations around development lending.
Beyond specific substantive concerns over the new draft, then, a primary fear for many civil society groups is that any weakening of the World Bank’s standards could, again, influence many other lending institutions.
“One of our biggest concerns about the draft changes is not just that it is going to put millions of people affected by World Bank projects at greater risk of impoverishment, but that it is going to trigger a race to the bottom,” David Pred, a co-founder of Inclusive Development International, a watchdog group, told MintPress.
“Other financial institutions that followed the bank in building up their standards during the 1990s and 2000s will now follow the bank in tearing them down.”
According to Pred and others, the presence of other financial institutions and development funders could well be playing a significant role in guiding, or forcing, the World Bank’s current safeguards reform process. Particularly worrisome for the bank’s management has been the rise of China’s foreign assistance interests (engagement that generally comes with far fewer rights-related strings) as well as the recent creation of a development bank by five middle-income countries, known collectively as the BRICS countries — Brazil, Russia, India, China and South Africa.
“I think there’s a strong undercurrent of realpolitik that is motivating these changes,” Pred said. “The bank’s management is clearly worried about losing market share to China and the BRICS bank and becoming irrelevant, so it is trying to make itself more attractive to borrowers by cutting what is seen by some as red tape.”
If true, such considerations will be hard to maneuver around, even as discussions continue around the new reforms. The safeguards changes remain in their draft stage, and are not expected to be adopted until next year at the earliest. Through the end of this year, the bank’s safeguards team will now be engaging in stakeholder consultations around the world. (Full information is available here.)
Still, civil society groups say they have already gone through the intensive process of offering technical inputs for the reforms, and are frustrated that they feel they have little to show for it today.
“There is scope for additional discussion over different substantive points,” the Bank Information Center’s Klemm said. “But by green-lighting the draft for consultation and allowing it to proceed in its current form, the fundamental shift reducing the bank’s own responsibility and placing it squarely on the borrowers, and the broader attempts to maximize flexibility, would be hard to walk back.”
Others are promising an increase in outside pressure in coming months, particularly from civil society groups in developing countries.
“There is very little interest in wasting our time continuing to participate in consultations that will be ignored by the bank’s management,” Inclusive Development International’s Pred said.
“We are getting ready to take to the streets and make sure that the decision-makers on the [World Bank’s] board hear loud and clear that the people who will impacted by these policies demand stronger safeguards that will ensure that World Bank projects respect human rights and protect the planet from environmental destruction.”