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NGO Letters to World Bank on Governance and Anti-Corruption Framework

16 August 2006

NGO letter to WB President, Paul Wolfowitz raising concerns about the process and content of the Bank Governance and Anti-corruption strategy (see below)

Eurodad letter to WB President, Paul Wolfowitz on the Bank's need to address crucial issues of odious and illegitimate debt (see at bottom)

Letter on Governance and Anti-corruption strategy
31st July 2006

Dear Mr Wolfowitz,

We are writing to you in relation to the World Bank Governance and Anti-corruption Strategy that is currently being developed in the Bank. We understand this will be a Development Committee paper for the Annual Meetings. At the Spring Meetings this year, the Development Committee made a clear request for such a strategy should be drawn up. This was partly in response to the several actions undertaken by the World Bank to freeze or cancel loans or delay debt cancellation because of alleged corruption. We have several concerns about this strategy, both in terms of the way it has been developed and the direction in which you would appear to wish the Bank to move.

We are also attaching the summary results of a survey carried out by CIDSE, the Catholic network of NGOs, of 56 civil society organisations in 24 Southern countries on the subject of: governance, corruption and the role of official donors in working on these issues. This survey has informed our views on the Bank’s proposed strategy.

1 Rushed and untransparent process

1.1 Firstly we wish to express our deep concern at the extremely untransparent and non-participatory manner in which this strategy - with its potential for broad changes in the way the Bank does business – is being elaborated. We have decided not to participate in the two-hour conference call organised by the Bank on the 31st July and the three-week online consultation of an outline document of this strategy. These events do not constitute a meaningful consultation where views of civil society groups from the North and South can be taken on board. This is so both because of the short deadline and because the Bank has already moved much further ahead in this process.

1.2 The consultation is taking place based on a very broad outline document that was circulated within the Bank during the first week of June. However a draft strategy document with much clearer proposals has already been circulated within the Bank. This document is not public and is not being discussed at these consultations. Furthermore, it is totally unclear how the Bank proposes to feed the results of these consultations into the actual drafting and development of the strategy,

We would like to know why the Bank did not plan for this strategy to be drawn up in consultation with developing country actors, whom ultimately it will most affect and particularly with civil society organisations in the South, many of whom are working tirelessly to hold their governments to account and improve governance and fight corruption?

The Bank must ensure that any shifts in the way it does business are properly consulted upon with a broad set of actors, particularly in developing countries.  The Development Committee should not approve a strategy or framework with broad implications for the way the Bank does business in developing countries without that being the case. Whilst we are aware that consultation on operationalisation of any such strategy is planned by the Bank, we firmly believe that the strategy itself must be the subject of broad consultation. 

2 Creeping Mandate of the Bank

2.1 The strategy at present takes a top-down, interventionist approach, which appears to be based on the belief that the Bank is both capable of and mandated with fixing governance systems without recognition of democratic processes. It portrays governance as a problem that can be fixed by changing institutions and championing the private sector whilst paying scant regard to the crucial issues of the fulfilment of human rights and broad-based development.

2.2 The World Bank has neither the mandate, the legitimacy nor the capacity to become a global arbiter on corruption. Whilst corruption is a concern in many developing countries around the world recent events in the UK (cash for peerages) and the US (Enron, Katrina relief) illustrate that it is far from being a ‘poor country problem’. The problem needs to be seen in the context of other challenges that countries face in building democratic developmental states and combating poverty.

The World Bank should focus its energies on its own operations and not move into the role of a ‘global policeman’ on corruption. It cannot be both judge and jury of its own actions and is not a legitimate actor to lead the charge on issues of anti-corruption and much less in the field of governance.

However, it could usefully play a role in supporting efforts to reduce corruption in the North. This includes supporting the UN Convention against Corruption (UNCAC), the OECD Anti-bribery Convention and mandatory adherence to the EITI. The Bank should work to establish an effective monitoring system for UNCAC built around the pillars of transparency and public participation. The Bank could also become one of the key champions of the UNCAC and provide financial support for national and international institutions involved in its implementation

3 Ownership as an afterthought

3.1 In a press conference in Berlin in January 2006 you said that “Success in this great effort of fighting poverty will depend most of all on strong ownership by the developing countries themselves of their development processes”. However this principle of ownership seems more like an afterthought in this governance and anti-corruption strategy. “Ownership of the reform process”, which surely should involve political negotiation, bargaining and public debate, will apparently be brought about by giving countries “capacity-building” as part of the monitoring of a Bank-initiated and Bank-developed framework. Lessons from the past have shown us that ownership of change can not realistically be engendered in this manner.

4 Accountability to whom?

4.1 The Bank recognises the importance of transparency and access to information as being a cross-cutting imperative that can facilitate domestic accountability processes. In addition to continuing to support improvements in public financial management the Bank seems to be proposing that it will move into new areas for the institution such as supporting freedom of information and freedom of the media. Yet there is no proposal for how the Bank will improve its own transparency in terms of access to information, access to key decision-making meetings or active dissemination on its operations and disbursements.

The Bank needs to ensure that it is more transparent in its own decision-making processes and that it takes an approach which facilitates domestic accountability rather than taking a top-down approach to ‘fixing’ governance problems. 

- Support for improvements in transparency in public financial management should be directed towards producing information that is useful for citizens rather than for fulfilling the Bank’s own fiduciary requirements.
- The Bank should actively disseminate disaggregated data of the disbursements that it makes to developing countries by type of credit, along with associated reform commitments, as well as making clear how much money it commits to developing countries and then actually disburses.
- Respect for standards of transparency must be respected by lenders, borrowers and the private sector alike.

5 No More Conditionality

5.1 The World Bank continues to use conditionality as a tool for bringing about change and pushing the policies that it sees as most apt for developing countries. There are huge problems with conditionality, which have been much debated, and yet the Bank continues to use it as a tool. We are extremely concerned that any new Governance and Anti-corruption Strategy should not increase the burden of conditionality that countries already have to deal with.   This kind of interference in complicated political matters, in which the Bank arguably does not have competence, would be totally inappropriate.

5.2 Whilst the Bank is proposing greater flexibility and less conditionality for middle-income countries, low-income countries look set to bear the brunt of more externally imposed conditions, including yet more privatisation of state-owned companies and banks and less flexibility in how the Bank does business.

The Bank should not impose conditions on its loans and rather agree mutual standards with the country government and other national actors for public financial management which are clearly oriented towards making government revenue and expenditure transparent and accountable to the public. This would enable citizens to hold their own governments to account and make a real shift in its approach towards monitoring development outcomes.

The Bank has committed to reducing the burden of conditionality it places on its loans. This new strategy must not mean that the efforts being made in this area are reversed.

6 Local knowledge/ governance assessment

6.1 The Bank is proposing to increase its analysis of governance and corruption issues and carry out risk and vulnerability assessments by drawing on existing tools, more collaboration and joint analytic work with other donors and potentially using new tools also. It is also proposing to increase the number of field-based staff working as governance advisors. 

6.2 Whilst it is clear that the Bank’s activities would benefit from much better political economy analysis, this should not translate into the Bank developing whole departments of “governance experts” at the country level. The real experts on political economy issues in any given country are the people that live in that country. The high turnover of Bank staff in any given country office makes them severely compromised in their understanding of how a country’s systems actually work.

The Bank should make sure that it draws on local and existing knowledge to inform its lending programmes and not rely on external advisors.

Any governance assessment that is made must be made public.  Whilst there may be some trade-offs for transparency, the benefits far outweigh the costs and will contribute to greater incentives for improving governance and citizen engagement with the state.

We trust that these concerns will be taken on board and look forward to seeing them reflected in the development of this World Bank strategy. The below-mentioned civil society groups and their extensive networks of contacts will continue to work actively at all levels to monitor progress on these vital issues.

Yours sincerely,

CIDSE, EURODAD, LATINDAD, AFRODAD

Other signatories to this letter:

Aksjon Slett U-landsgeldja (SLUG), Norway
Bank Information Center, United States
Both ENDS, Netherlands
The Bretton Woods Project, UK
Debt and Development Coalition, Ireland
International Rivers Network, USA
Norwegian Church Aid
World Development Movement, UK

Cc:

World Bank Executive Directors

World Bank staff:
John Garrison
Graeme Wheeler
Sanjay Pradhan
Daniel Kauffman
Jim Adams

Letter on Odious and Illegitimate Debt
 

Avenue Louise, 176
1050 Brussels
Belgium
+32 2 543 90 64

13 July 2006

Mr. Paul Wolfowitz

World Bank President

World Bank, Washington DC

Dear President Wolfowitz,

At this year’s World Bank Spring Meetings, you announced your intention to continue the World Bank’s fight against corruption. EURODAD (European Network on Debt and Development) was pleased to learn that there would be renewed international efforts to hold private corporations and individuals accountable for exporting corruption to developing economies and that the Bank correctly recognises that corruption is not just a developing country phenomenon. EURODAD is also very supportive of international efforts to help countries recover stolen assets through the international banking system. These elements are crucial components of any comprehensive strategy which aims to address corruption successfully.

Nevertheless, we have strong doubts about the Bank expanding its mandate to try and solve governance problems in developing countries from above; whilst at the same time it is paying insufficient attention to its own responsibilities and accountabilities. EURODAD raised its concerns about the lack of attention to Bank lending practices to date both directly with you and with Bank senior management at this year’s Spring Meetings. We would now like to put these serious concerns into writing.

EURODAD believes that any comprehensive approach to corruption necessarily involves the critical examination of past Bank lending policies and practices and the cancellation of debts found to be fraudulent, corrupt and illegitimate. During your intervention at this year’s Development Committee Press Conference, you correctly argued that “governance and accountability are the real story” and that the key issue at stake for the World Bank Group is “how to promote good governance and accountability within our lending and project portfolios”[1]. EURODAD argues that good governance and accountability must begin at home, by acknowledging and correcting the mistakes of the past. Indeed looking towards the future, how can any approach to weed-out corruption be comprehensive or successful if the Bank does not look critically at the lending practices undertaken by the institution in the past and learn from them? The Bank must accept co-responsibility for its mistakes and agree to cancel Bank debts resulting from loans where Bank officials knew much of the money would be diverted by corrupt elites. Indeed, as the Africa Commission report notes very clearly: “much of [Africa’s] debt was incurred by dictators who were enriching themselves through their countries’ oil, diamonds and other resources and who were supported during the Cold War by the very countries now receiving debt repayment”.[2]This is clearly unacceptable.

In this context, EURODAD believes that the World Bank should initiate a serious and open inquiry into past Bank lending policies and practices and the problem of odious and illegitimate debt. This necessarily forms part of any sincere effort to address global corruption problems. Indeed the Norwegian Government has set money aside to support World Bank and UNCTAD research into the critical issue of odious and illegitimate debt (US$20.000) but so far the Bank has failed to begin this important work. EURODAD would urge the Bank to initiate this research – in parallel with a serious public enquiry – without further delay. Your expressed commitment to tackling corruption and mutual accountability require that the Bank take this course of action.

At the Spring Meetings, when challenged orally on this issue, Bank senior management argued that it was commonly felt that the Heavily Indebted Poor Countries (HIPC) Initiative had dealt with, and cancelled, many debts where the populations of those countries had serious allegations of illegitimate debt. It is important however, to publicly acknowledge the odious and illegitimate nature of much HIPC debt, for example the Democratic Republic of Congo and this has not been done. EURODAD would also argue that there are many more severely indebted countries that are excluded from the HIPC Initiative that have equally serious allegations. These include for example Indonesia and the Philippines. This response from the Bank is therefore not satisfactory.

We believe that the critical issue of odious and illegitimate debt needs to be placed firmly on the Bank Board agenda, and we urge you to do so without delay. You state that “governance and accountability are the real story, a story with the power to transform the lives of the world's poor”[3]. Odious and illegitimate debts are being serviced today to the detriment of the world’s poor while lenders are absolved of all responsibility and accountability for their actions. The cancellation of these debts, on the other hand, has the power to transform their lives. We therefore urge you to take decisive action recognising that this will also act as a deterrent for the Bank and other international creditors to extend corrupt and illegitimate loans in the future.

EURODAD felt very strongly that this issue should be raised with you both orally and in writing. We welcome your written response as well as the opportunity to discuss this issue with you and your colleagues in more detail before this year’s forthcoming Annual Meetings. Note that I will be in Washington DC on 5 and 6 September and would be available to discuss the issues raised within this letter with Bank staff.

Yours Sincerely,

Gail Hurley

EURODAD

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[1]IMF / World Bank Group Spring Meetings 2006 - Development Committee Press Conference:

[2]Our Common Interest Report Of The Commission For Africa, 2005:

[3]Ibid.