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Eye on the IFIs

New World Bank Environment Strategy Boosts Private Sector Role

WASHINGTON, Jun 8 2012 (IPS) - The World Bank this week released its new environment strategy for the next decade, 2012 through 2022, saying the policy framework was crafted in response to “calls from governments and the private sector for new approaches to development in light of unprecedented environmental challenges”.

In unveiling the document, the Bank explained that the new strategy “recognizes that despite the progress made in reducing global poverty, there has been significantly less progress in managing the environment sustainably … the global environment has reached a critical state that could undermine livelihoods, productivity, and global stability.”

The strategy lays out broad goals of prioritising energy efficiency and promoting low-emission development strategies, and offers important thinking on how to expand current economics-focused metrics of wellbeing.

While lauding certain parts of the strategy, environment groups are warning that the new document may place too much priority on interventions from the private sector. They note that experience across the globe has suggested a fairly direct connection between greater private-sector project involvement and decreased ability to monitor environmental and social impact.

Also of concern is a new component in which the Bank emphasises the “valuation” of countries’ natural resources, such as forests, wetlands and oceans.

“I just don’t see how going towards the increased financialisation of the global commons and natural resources is a move in the right direction,” Karen Orenstein, with Friends of the Earth, a watchdog group, told IPS.

“If anything, the lesson the Bank should have learned from past efforts on liberalisation is that privatisation doesn’t work. The most marginalised are the ones that end up worst off.”

The Bank says that such fears are misplaced. The valuation process, known as natural capital accounting, “is more about measurement and information – it could even be natural assets in physical terms. For example, how much water is being used by which sector,” Bank officials told IPS in an e-mail.

“Knowing the total value of natural capital can help us better address poverty issues. Not knowing the value of natural capital is more likely to result in losses that affect the poor. The key is not only to measure the total value of natural assets, but also to measure the distribution of benefits, how much goes to each stakeholder group and the dependence of each group on natural capital, especially the poor.”

One specific change from the previous environment strategy – which covered 2001 through 2011 – is an expansion of the environment strategy’s mandate to cover the participation of the entire World Bank Group.

This will now include member institutions such as the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA), which focus on building the private sector and on foreign direct investment, respectively.

“The Strategy acknowledges the vital role of the private sector in achieving sustainable and inclusive economic growth and development,” an IFC official, Nena Stoiljkovic, said in a statement.

There is indeed a role for multilateral lenders to play in strengthening small- and medium-sized private businesses in developing countries, Orenstein says, but that isn’t the scale at which most international financial institutions have appeared comfortable operating in the past.

“Because those small and medium enterprises do not offer a high rate of return, they are typically bypassed by most international flows of money meant to prop up the private sector,” she says. “Look at the record of the IFC – low-income countries are the least benefited by these types of programmes.”

The Bank counters that it supports “many small-scale, decentralized projects, as well as large-scale projects, which typically bring greater benefits to larger numbers of people”.

Meanwhile, there are notably few operational details in the new environment strategy. A document such as this is typically stronger on rhetoric than on day-to-day issues of implementation, however, and should at least in part be read as a statement of aspiration.

In this light, Steve Herz, an attorney with the Sierra Club, a U.S. environment advocacy group, points out that the new environment strategy includes some surprisingly non-traditional language.

According to the strategy, “The current economic model, driven by unsustainable patterns of growth and consumption, is clearly putting too much pressure on an already stretched environment.” In so saying, Hertz told IPS, the document is implicitly criticising the policies that the World Bank itself has followed for decades.

Does this indicate a new direction for the Bank?

“The real question is how the new strategy impacts on the World Bank’s lending and operations. Which projects will it do differently, and which will it not do?” Herz asks.

“When the Bank does an intervention under the new strategy, how will it prioritise clean energy? Will it mean that, for instance, it won’t consider bankrolling a coal-fired power plant in Kosovo, like it’s currently doing? Unfortunately, from this document, it’s just not clear yet.”

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