Inter Press Service » Eye on the IFIs http://www.ipsnews.net Journalism and Communication for Global Change Thu, 17 Apr 2014 00:35:45 +0000 en-US hourly 1 http://wordpress.org/?v=3.8.3 U.S. Blasted on Failure to Ratify IMF Reforms http://www.ipsnews.net/2014/04/u-s-blasted-failure-ratify-imf-reforms/?utm_source=rss&utm_medium=rss&utm_campaign=u-s-blasted-failure-ratify-imf-reforms http://www.ipsnews.net/2014/04/u-s-blasted-failure-ratify-imf-reforms/#comments Sat, 12 Apr 2014 00:31:45 +0000 Jim Lobe http://www.ipsnews.net/?p=133620 While Republicans complain relentlessly about U.S. President Barack Obama’s alleged failure to exert global leadership on geo-political issues like Syria and Ukraine, they are clearly undermining Washington’s leadership of the world economy. That conclusion became inescapable here during this week’s in-gathering of the world’s finance ministers and central bankers at the annual spring meeting here […]

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By Jim Lobe
WASHINGTON, Apr 12 2014 (IPS)

While Republicans complain relentlessly about U.S. President Barack Obama’s alleged failure to exert global leadership on geo-political issues like Syria and Ukraine, they are clearly undermining Washington’s leadership of the world economy.

That conclusion became inescapable here during this week’s in-gathering of the world’s finance ministers and central bankers at the annual spring meeting here of the International Monetary Fund (IMF) and the World Bank.The delays are clearly damaging Washington’s global economic and geo-political agenda: persuading other G20 countries to adopt expansionary policies and punish Moscow for its moves against Ukraine.

In the various caucuses which they attended before the formal meeting began Friday, they made clear that they were quickly running out of patience with Congress’s – specifically, the Republican-led House of Representatives – refusal to ratify a 2010 agreement by the Group of 20 (G20) to modestly democratise the IMF and expand its lending resources.

“The implementation of the 2010 reforms remains our highest priority, and we urge the U.S. to ratify these reforms at the earliest opportunity,” exhorted the G20, which represent the world’s biggest economies, in an eight-point communiqué issued here Friday.

“If the 2010 reforms are not ratified by year-end, we will call on the IMF to build on its existing work and develop options for next steps…” the statement asserted in what observers here called an unprecedented warning against the Bretton Woods agencies’ most powerful shareholder.

The message was echoed by the Group of 24 (G24) caucus, which represents developing countries, although, unlike the G20, its communique didn’t mention the U.S. by name.

“We are deeply disappointed that the IMF quota and governance reforms agreed to in 2010 have not yet come into effect due to non-ratification by its major shareholder,” the G24 said.

“This represents a significant impediment to the credibility, legitimacy and effectiveness of the Fund and inhibits the ability to undertake further, necessary reforms and meet forward-looking commitments.”

The reform package, the culmination of a process that began under Obama’s notoriously unilateralist Republican predecessor, George W. Bush, would double contributions to the IMF’s general fund to 733 billion dollars and re-allocate quotas – which determine member-states’ voting power and how much they can borrow – in a way that better reflects the relative size of emerging markets in the global economy.

In addition to enhancing the IMF’s lending resources, the main result of the pending changes would increase the quotas of China, Brazil, Russia, India, and Turkey, for example, at the expense of European members whose collective representation on the Fund’s board is far greater than the relative size of their economies.

Spain, for instance, currently has voting shares similar in size to Brazil’s, despite the fact that the Spanish economy is less than two-thirds the size of Brazil’s. And of the 24 seats on the IMF’s executive board, eight to ten of them are occupied by European governments at any one time.

The reforms would only change the status quo only modestly. While the European Union (EU) members currently hold a 30.2 percent quota collectively, that would be reduced only to 28.5 percent. The biggest gains would be made by the so-called BRICS (Brazil, Russia, India, China, and South Africa) – from 11 percent to 14.1 percent — although almost all of the increase would go to Beijing.

Washington’s quota would be marginally reduced – from 16.7 percent to 16.5 percent, preserving its veto power over major institutional changes (which require 85 percent of all quotas). Low-income countries’ share would remain the same at a mere 7.5 percent collectively, although their hope – shared by civil-society groups, such as Jubilee USA and the New Rules for Global Finance Coalition — is that this reform will make future changes in their favour easier.

Thus far, 144 of the IMF’s 188 member-states, including Britain, France, and Germany and other European countries that stand to lose voting share, have ratified the package. But, without the 16.7 percent U.S. quota, the reforms can’t take effect.

The Obama administration has been criticised for not pressing Congress for ratification with sufficient urgency. But, realising that its allies’ patience was running thin, it pushed hard last month to attach the reform package to legislation providing a one-billion-dollar bilateral aid package for Ukraine during the crisis with Russia over Crimea.

While the Democratic-led Senate approved the attachment, the House Republican leadership rejected it, despite the fact that Kiev would have been able to increase its borrowing from the IMF by about 50 percent under the pending reforms.

House Republicans – who, under the Tea Party’s influence, have moved ever-rightwards and become more unilateralist on foreign policy since the Bush administration – have shown great distrust for multilateral institutions of any kind.

Both the far-right Heritage Foundation and the neo-conservative Wall Street Journal have railed against the reforms, arguing variously that they could cost the U.S. taxpayer anywhere from one billion dollars to far more if IMF clients default on loans, and that the changes would reduce Washington’s ability to veto specific loans.

They say the IMF’s standard advice to its borrowers to raise taxes and devalue their currency is counter-productive and could become worse given the Fund’s new emphasis on reducing income inequalities; and that, according to the Journal, the reforms “will increase the clout of countries with different economic and geo-political interests than America’s.”

Encouraged by, among others, the U.S. Chamber of Commerce and their Wall Street contributors, some House Republicans have indicated they could support the reforms. But thus far they have insisted that they would only do so in exchange for Obama’s easing new regulations restricting political activities by tax-exempt right-wing groups.

Meanwhile, however, the delays are clearly damaging Washington’s global economic and geo-political agenda – persuading other G20 countries to adopt expansionary policies and punish Moscow for its moves against Ukraine – during the meetings here.

“The proposed IMF reforms are a no-brainer,” according to Molly Elgin-Cossart, a senior fellow for national security and international policy at the Center for American Progress. “They modernise the IMF and restore American leadership on the global stage at a time when the world desperately needs it, without additional cost for American taxpayers.”

Further delay, especially now that the G20 appear to have set a deadline, could in fact reduce Washington’s influence.

While she stressed she was not prepared to give up on Congress, IMF managing director Christine Lagarde told reporters Thursday the Fund may soon have to resort to a “Plan B” to implement the reforms without Washington’s consent.

While she did not provide details of what are now backroom discussions, two highly respected former senior U.S. Treasury secretaries suggested in a letter published Thursday by the Financial Times that “the Fund should move ahead without the U.S. …by raising funds from others while depriving the U.S. of some or all of its longstanding power to block major Fund actions.”

C. Fred Bergsten and Edwin Truman, who served under Jimmy Carter and Bill Clinton, respectively, suggested that the IMF could make permanent an initiative to arrange temporary bilateral credit lines of nearly 500 billion dollars from 38 countries who could decide on their disposition without the U.S.

More radically, they wrote, the Fund could increase total country quota subscriptions that would remove Washington’s veto power over institutional changes.

“The U.S. deserves to lose influence if it continues to fail to lead,” the two former officials wrote.

Jim Lobe’s blog on U.S. foreign policy can be read at Lobelog.com.

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“Sanitation for All” a Rapidly Receding Goal http://www.ipsnews.net/2014/04/sanitation-rapidly-receding-goal/?utm_source=rss&utm_medium=rss&utm_campaign=sanitation-rapidly-receding-goal http://www.ipsnews.net/2014/04/sanitation-rapidly-receding-goal/#comments Sat, 12 Apr 2014 00:10:32 +0000 Michelle Tullo http://www.ipsnews.net/?p=133616 World leaders on Friday discussed plans to expand sustainable access for water, sanitation and hygiene, focusing in particular on how to reach those in remote rural areas and slums where development projects have been slow to penetrate. The meeting, which took place amidst the semi-annual gatherings here of the World Bank and International Monetary Fund (IMF) could […]

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An open drainage ditch in Ankorondrano-Andranomahery. Madagascar receives just 0.5 dollars per person per year for WASH programmes . Credit: Lova Rabary-Rakontondravony/IPS

An open drainage ditch in Ankorondrano-Andranomahery. Madagascar receives just 0.5 dollars per person per year for WASH programmes . Credit: Lova Rabary-Rakontondravony/IPS

By Michelle Tullo
WASHINGTON, Apr 12 2014 (IPS)

World leaders on Friday discussed plans to expand sustainable access for water, sanitation and hygiene, focusing in particular on how to reach those in remote rural areas and slums where development projects have been slow to penetrate.

The meeting, which took place amidst the semi-annual gatherings here of the World Bank and International Monetary Fund (IMF) could be the world’s largest ever to take place on the issue."Ministers are much happier to talk and support a hydro project, like a huge dam, and are less happy to open up a public latrine." -- Darren Saywell

Water, sanitation and hygiene, collectively known as WASH, constitute a key development metric, yet sanitation in particular has seen some of the poorest improvements in recent years.

Participants at Friday’s summit included U.N. Secretary-General Ban Ki-moon, World Bank President Jim Yong Kim, UNICEF Executive Director Anthony Lake as well as dozens of government ministers and civil society leaders.

“Today 2.5 billion people do not have access to clean water, sanitation and hygiene,” the World Bank’s Kim said Friday. “This results in 400 million missed school days, and girls and women are more likely to drop out because they lack toilets in schools or are at risk of assault.”

Kim said that this worldwide lack of access results in some 260 billion dollars in annual economic losses – costs that are significant on a country-to-country basis.

In Niger, Kim said, these losses account for around 2.5 percent of gross domestic product (GDP) every year. In India the figure is even higher – around 6.4 percent of GDP.

Friday’s summit was convened by UNICEF.

“UNICEF’s mandate is to protect the rights of children and make sure they achieve their full potential. WASH is critical to what we hope for children to achieve, as well as to their health,” Sanjay Wijesekera, associate director of programmes for UNICEF, told IPS.

“Every day, 1400 children die from diarrhoea due to poor WASH. In addition, 165 million children suffer from stunted growth, and WASH is a contributory factor because clean water is needed to absorb nutrients properly.”

Over 40 countries came to the meeting to share their commitments to improving WASH.

“Many countries have already shown that progress can be made,” Wijesekera said. “Ethiopia, for example, halved those without access to water from 92 percent in 1990 to 36 percent in 2012, and equitably across the country.”

A water kiosk in Blantyre, Malawi. Credit: Charles Mpaka/IPS

A water kiosk in Blantyre, Malawi. Credit: Charles Mpaka/IPS

Good investment

Indeed, the Millennium Development Goal (MDG) for water halved the proportion of people without access to improved sources of water five years ahead of schedule. Yet the goal to improve access to quality sanitation facilities was one of the worst performing MDGs.

In order to get sanitation on track, a global partnership was created called Sanitation and Water for All (SWA), made up of over 90 developing country governments, donors, civil society organisations and other development partners.

“Sanitation as a subject is a complicated process … You have different providers and actors involved at the delivery of the service,” Darren Saywell, the SWA vice-chair, told IPS.

“NGOs are good with convening communities and community action plans. The private sector is needed to respond and provide supply of goods when demand is created. Government needs to help regulate and move the different leaders in the creation of markets.”

In addition, sanitation and hygiene are not topics that can gain easy political traction.

“It is not seen as something to garner much political support,” Saywell says. “Ministers are much happier to talk and support a hydro project, like a huge dam, and are less happy to open up a public latrine.”

Saywell says that an important part of SWA’s work is to demonstrate that investing in WASH is a good economic return.

“Every dollar invested in sanitation brings a return of roughly five dollars,” he says. “That’s sexy!”

Sustainable investments

Friday’s summit covered three main issues: discussing the WASH agenda for post-2015 (when the current MDGs expire), tackling inequality in WASH, and determining how these actions will be sustainable.

“We would like the sector to the set the course for achieving universal access by 2030,” Henry Northover, the global head of policy at WaterAid, a key NGO participant, told IPS.

Although the meeting did not set the post-2015 global development goals for WASH, it was meant to call public attention to the importance of these related goals and ways of achieving them.

“Donors and developing country governments need to stop seeing sanitation as an outcome of development, but rather as an indispensable driver of poverty reduction,” Northover said.

WaterAid recently published a report on inequality in WASH access, Bridging the Divide. The study looks at the imbalances in aid targeting and notes that, for instance, Jordan receives 850 dollars per person per year for WASH while Madagascar, which has considerably worse conditions, receives just 0.5 dollars per person per year.

The report says this imbalance in aid targeting is due to “geographical or strategic interests, historical links with former colonies, and domestic policy reasons”. Northover added to this list, noting that “donors are reluctant to invest in fragile states.”

“In India, despite spectacular levels of growth over the past 10 years, we have seen barely any progress in the poorest areas in terms of gaining access to sanitation,” he continued. “Regarding inequality, we are talking both in terms of wealth and gender: the task falls to women and girls to fetch water, they cannot publicly defecate, and have security risks.”

Others see funding allocation as only an initial step.

“Shift the money to the poorer countries, and then, so what?” John Sauer, of the non-profit Water for People, asked IPS. “The challenge is then the capacity to spend that money and absorb it into district governments, the ones with the legal purview to make sure the water and sanitation issues get addressed.”

Friday’s meeting also shared plans on how to use existing resources better, once investments are made.

“If there is one water pump, it will break down pretty quickly,” WaterAid’s Northover said. “This often requires some level of institutional capability for financial management.”

Countries also described their commitments to make sanitation sustainable. The Dutch government, for instance, introduced a clause in some of its WASH agreements that any related foreign assistance must function for at least a decade. East Asian countries like Vietnam and Mongolia are creating investment packages that also help to rehabilitate and maintain existing WASH systems.

“This is probably one of the biggest meetings on WASH possibly ever, and what we mustn’t forget is that the 40 or 50 countries coming are making a commitment to do very tangible things that are measurable, UNICEF’s Wijesekera told IPS. “That bodes well for achieving longer-term goals of achieving universal access and equality.”

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U.S. Urged to Push World Bank on Human Rights Safeguards http://www.ipsnews.net/2014/04/u-s-urged-push-world-bank-human-rights-safeguards/?utm_source=rss&utm_medium=rss&utm_campaign=u-s-urged-push-world-bank-human-rights-safeguards http://www.ipsnews.net/2014/04/u-s-urged-push-world-bank-human-rights-safeguards/#comments Thu, 10 Apr 2014 23:25:27 +0000 Carey L. Biron http://www.ipsnews.net/?p=133578 Rights advocates and community leaders, together with some U.S. lawmakers, are urging the United States to take a more robust role in pushing the World Bank to explicitly incorporate human rights into policies that dictate how and when the bank can engage in project lending and technical assistance. The World Bank has been a pioneer […]

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Participants in Uganda’s second Gay Pride parade held in August 2013. World Bank President Jim Yong Kim recently received plaudits for halting a planned loan to Uganda after that country passed onerous anti-gay legislation. Credit: Faith Lokens/IPS

Participants in Uganda’s second Gay Pride parade held in August 2013. World Bank President Jim Yong Kim recently received plaudits for halting a planned loan to Uganda after that country passed onerous anti-gay legislation. Credit: Faith Lokens/IPS

By Carey L. Biron
WASHINGTON, Apr 10 2014 (IPS)

Rights advocates and community leaders, together with some U.S. lawmakers, are urging the United States to take a more robust role in pushing the World Bank to explicitly incorporate human rights into policies that dictate how and when the bank can engage in project lending and technical assistance.

The World Bank has been a pioneer in working to ensure that its assistance does not lead to or exacerbate certain forms of discrimination or environmental degradation.“No one at the bank was encouraged, rewarded or promoted for stopping a project because of human rights concerns.” -- Rep. James P. McGovern

Yet the Washington-based institution has long been criticised for refusing to institutionalise a specific focus on human rights, and is currently involved in a major review of these policies.

“I recognise that constructing sustainable relationships between development priorities and human rights can be a challenging endeavour for the World Bank, but it is a crucial endeavour to undertake,” James P. McGovern, a member of the U.S. House of Representatives, said Wednesday at a hearing he chaired on the subject.

“Human rights due diligence and assessments would ensure that each project is properly vetted and that possible violations of human rights are acknowledged beforehand and can be prevented. This not only protects the integrity of individuals but also ensures the sustainability of a project, which means more people will benefit from the World Bank’s investment long term.”

The World Bank and its sister institution, the International Monetary Fund, are currently meeting in Washington for a semi-annual summit.

McGovern warned that important bank policies on rights, the environment and indigenous peoples are often treated as “little more than one box that needed to be checked” by project managers. Further, he said, “No one at the bank was encouraged, rewarded or promoted for stopping a project because of human rights concerns.”

The World Bank has long been barred by its membership from engaging in overtly political issues. Yet many say rights issues need not be considered political, and World Bank President Jim Yong Kim recently received plaudits for halting a planned loan to Uganda after that country passed onerous anti-gay legislation.

Kim “responded very well” to the Uganda issue, Barney Frank, a former member of Congress, told the hearing Wednesday. But he warned that “it’s not good when things are done ad hoc.”

“Some of the countries can complain they weren’t warned,” Frank said.

“That’s why it’s important to have a framework in place, so any country contemplating brutal actions in the future will be on notice … I think it’s reasonable to say, ‘If we’re going to punish you, we should let you know in advance what the rules are.’”

Review opportunity

A two-year review of the bank’s safeguard policies is currently underway, and could be finished by the end of the year. Proponents of these reforms say the review offers an important opportunity for leverage, particularly by the United States.

“It’s really incumbent on the United States and the U.S. Congress, as large shareholders with strong influence, to take a very progressive and aggressive role on promoting human rights standards at the bank,” Arvind Ganesan, director for business and human rights at Human Rights Watch, a global watchdog group, told IPS.

“This is critically important because, increasingly, governments such as that of China have influence over the bank, and they’ve been very clear they don’t want human rights standards incorporated into the bank.”

Ganesan, who also testified Wednesday, says the bank needs to incorporate human rights-focused due diligence into its vetting of potential project funding, and to show that its projects are mitigating human rights concerns.

On questioning from lawmakers, Ganesan noted that several European countries on the World Bank’s board have offered strong support for such changes. But he warned that other governments have been “hostile” to the idea.

Certain parts of the bank’s staff are sympathetic to the idea of greater human rights focus in the institution’s lending, Ganesan says. But he cautions that “the staff in general needs to be far more motivated to include human rights.”

A bank spokesperson told IPS the safeguards review is “making good progress”, with a public update due Saturday.

“We are ramping up our standards to ensure the delivery of a strengthened policy framework which is more efficient and comprehensive; a system that will enable the Bank to assert its position as a force for good in sustainable development; a new policy framework that is clear to implement and to hold us accountable for,” the spokesperson said in a statement.

“[W]e are looking at how most appropriately to address the adverse impacts of discrimination and exclusion … along with how to cover vulnerable/disadvantaged issues such as sexual orientation.”

Lessons learned

Lawmakers on Wednesday also heard testimony about three past World Bank-supported projects: agricultural development initiatives in Uzbekistan, despite widespread findings of child and forced labour in that country’s important cotton industry; an oil pipeline between Chad and Cameroon that saw bank funds diverted by a corrupt and oppressive government in N’Djamena; and a series of palm oil plantations in Honduras that have led to the takeover of indigenous lands.

The Chad-Cameroon pipeline, worth some seven billion dollars “was meant to be transformational. Yet even an internal bank evaluation found the project had not contributed to poverty reduction but rather enriched the government of Chad – meaning more and more corruption and human rights violations,” Delphine Djiraibe, an attorney with the Chadian Association for the Promotion and Defence of Human Rights, told the hearing.

“We hope the U.S. Congress will put pressure on the World Bank Group to learn from the fiasco of this project and not keep repeating the same mistakes that lead to serious human rights violations and environmental degradation.”

On Thursday, over 180 global civil society groups accused the World Bank of directly facilitating a spate of large-scale land acquisitions through its annual publication of business-friendliness metrics known as the Doing Business index, as well as a new initiative called Benchmarking the Business of Agriculture. While such rankings measure how a country’s regulations impact on industry, critics say the widely watched indicators push governments to prioritise industry over poor and marginalised communities.

“The [Doing Business] framework is creating competition between nations to cut down economic regulations as well as environmental and social safeguards in order to score better in the ranking,” the Oakland Institute, a watchdog group, says in a new report on the issue.

“[T]he … ranking has the collateral effect of facilitating land grabbing by advocating for ‘protection of investors’ and property reforms that make land a marketable commodity and facilitate large-scale land acquisitions.”

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World Bank, IMF Urged to Act on New Inequality Focus http://www.ipsnews.net/2014/04/world-bank-imf-urged-act-new-inequality-focus/?utm_source=rss&utm_medium=rss&utm_campaign=world-bank-imf-urged-act-new-inequality-focus http://www.ipsnews.net/2014/04/world-bank-imf-urged-act-new-inequality-focus/#comments Thu, 10 Apr 2014 21:37:31 +0000 Farangis Abdurazokzoda http://www.ipsnews.net/?p=133571 Global income inequality threatens economic and social viability, according to a World Bank report released Thursday, reiterating a new but increasingly forceful narrative from both the bank and International Monetary Fund (IMF). Yet as the two Washington-based institutions gather here this week for semi-annual meetings, anti-poverty campaigners are calling on the bank and IMF to translate […]

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Residents of Nairobi's Mathare slum, one of the largest in Kenya. Credit: Miriam Gathigah/IPS

Residents of Nairobi's Mathare slum, one of the largest in Kenya. Credit: Miriam Gathigah/IPS

By Farangis Abdurazokzoda
WASHINGTON, Apr 10 2014 (IPS)

Global income inequality threatens economic and social viability, according to a World Bank report released Thursday, reiterating a new but increasingly forceful narrative from both the bank and International Monetary Fund (IMF).

Yet as the two Washington-based institutions gather here this week for semi-annual meetings, anti-poverty campaigners are calling on the bank and IMF to translate such rhetoric into practice.“Fewer than 100 people control as much of the world’s wealth as the poorest 3.5 billion combined.” -- World Bank President Jim Yong Kim

“World Bank President Jim Kim and IMF Managing Director Christine Lagarde have been vocal about the dangers of skyrocketing inequality, but there is still a long way to go,” Max Lawson, the head of policy and advocacy for Oxfam GB, a humanitarian and advocacy group, told IPS.

“There’s no trade-off between growth and inequality,” concurred his colleague, Nicolas Mombrial, of Oxfam America. “There will be no inclusive growth if economic inequality remains out of control.”

Oxfam and other groups are now calling on the World Bank and IMF to take concrete action to address issues associated with wealth inequality worldwide. IMF policies in particular have been criticised in the past for particularly negative impacts on poor and marginalised communities.

“We are pleased to see the IMF recognise that drastic fiscal consolidation policies have been a drag on growth, something that unions have been saying since the inappropriate shift to austerity made in 2010,” Sharan Burrow, general secretary of the International Trade Union Confederation (ITUC), said Thursday.

“The IMF’s undermining of labour standards and collective bargaining institutions in several European countries, for example, has already had important impacts on income distribution that are likely to intensify in the future. We urgently call for a review and major changes in the Fund’s labour market policies.”

Oxfam’s Lawson lists at least three areas that he would like to see receive serious consideration by the IMF and the World Bank.

“First of all, it is necessary to develop a more adequate measurement of income inequality,” he says. “This needs to look at not only the income of the bottom 40 percent of the world’s income earners are measured but also the income flows of the world’s top 10 percent.”

Lawson suggested that the IMF, given its constant and influential interaction with the world’s governments, would be particularly well placed to advance a stronger measurement of inequality.

“Secondly, it is necessary to reform taxation schemes,” Lawson continued. “It is not fair that a billionaire pays a lower percentage in tax than a bus driver. And thirdly, it is essential to provide access to universal health care and education.”

Oxfam is also calling on governments to address inequality by focusing more robustly on tax dodging and related financial secrecy. Along with others, the group is calling for a global goal to end extreme inequality as part of the discussion around the post-2015 international development goals.

“We cannot hope to win the fight against poverty without tackling inequality,” Oxfam says. “Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the top table.”

Widening gap

Inequality has become a particularly prominent topic in international policy discussions over the past two years. In part this is because, in the aftermath of the global economic downturn of 2008, the rich have bounced back much more quickly than the poor – thus widening the inequality gap.

A recent list of global billionaires published by Forbes underscored the scope of the problem. According to that data, just 67 people have as much wealth as the poorest 3.5 billion people.

“Fewer than 100 people control as much of the world’s wealth as the poorest 3.5 billion combined,” World Bank Group President Jim Yong Kim said Thursday at the start of the World Bank-IMF Spring Meetings. At similar meetings last year, Kim announced a new bank goal of eliminating extreme poverty by 2030.

Yet on Thursday he warned that economic growth is not enough to reach that goal.

“Even if all countries grow at the same rates as over the past 20 years, and if the income distribution remains unchanged, world poverty will only fall by 10 percent by 2030, from 17.7 percent in 2010,” he said.

“We need a laser-like focus on making growth more inclusive and targeting more programmes to assist the poor directly if we’re going to end extreme poverty.”

Kim’s warning is underscored in a press release published on Thursday by the bank.

“Rising inequality of income can dampen the impact of growth on poverty,” the paper says.

“In countries where inequality was falling, the decline in poverty for a given growth rate was greater. Even if there is no change in inequality, the ‘poverty-reducing power’ of economic growth is less in coun­tries that are initially more unequal.”

The paper emphasises that the governments and donors can’t aim only to lift people out of extreme poverty, but also have to ensure that people aren’t “stuck just above the extreme poverty line due to a lack of opportunities that might impede progress toward better livelihoods.”

“Persistent inequality, where the rich are continuously advantaged and the rest struggle to catch up, makes people frustrated with the system,” Carol Graham, a scholar at the Brookings Institution, a Washington think tank, told IPS.

“Such inequality pre-programmes the public perception downward. And even in countries where there is a progress with regard to inequality, and social frustration impacts political instability.”

In a blog post, Carol Graham and another researcher tie recent protests in Chile, Brazil, Russia, Turkey, Venezuela, Ukraine and even the Arab Spring to widening income differential or inequality.

“The protesters are not a nothing-to-lose risk taker, but middle-aged, middle income, and more educated than average people who are unhappy about an unfair advantage of the rich and a lack of opportunities for the poor,” they write, calling the “prototypical” protestors “frustrated achievers”.

“Extreme inequality is particularly dangerous in countries in political and economic transition,” they note.

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OP-ED: The World Bank’s Waste of Energy http://www.ipsnews.net/2014/04/world-banks-waste-energy/?utm_source=rss&utm_medium=rss&utm_campaign=world-banks-waste-energy http://www.ipsnews.net/2014/04/world-banks-waste-energy/#comments Thu, 10 Apr 2014 17:31:23 +0000 Janet Redman http://www.ipsnews.net/?p=133566 The World Bank’s job is to fight poverty. Key to lifting people out of poverty is access to reliable modern energy. It makes sense. Kids do better in school when they can study at night. Microbusiness owners earn more if they can keep their shops open after sundown. And when women and children don’t have […]

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By Janet Redman
WASHINGTON, Apr 10 2014 (IPS)

The World Bank’s job is to fight poverty. Key to lifting people out of poverty is access to reliable modern energy. It makes sense.

Kids do better in school when they can study at night. Microbusiness owners earn more if they can keep their shops open after sundown. And when women and children don’t have to gather wood for cooking they’re healthier and have more time for other activities.The programme seems to be more about erecting scaffolding around the crumbling CDM than about getting renewable energy to impoverished families.

What doesn’t make sense is using a failed scheme — like carbon trading — to pay for it.

Carbon trading was developed as a way for industry to comply with laws limiting their greenhouse gas emissions more cheaply. Companies that can’t or won’t meet carbon caps can purchase surplus allowances from others that have kept pollution below legal limits.

The U.N. established an international system called the Clean Development Mechanism (CDM) to make it even cheaper for businesses in rich countries to meet carbon regulations by paying for clean energy projects in developing nations. Purchasing these offsets through the CDM was promoted as a new way to provide financing to poorer countries.

But the poorest countries most in need of climate and development money generally don’t benefit from the CDM.

First, they often don’t have large industrial or fossil fuel-based energy sectors that generate significant volumes of carbon pollution. Also, it takes enormous time and effort to verify project plans, register with the CDM, and validate that emissions have been cut, making it impractical for investors to finance small projects that only generate a low number of carbon credits.

That was the case even before the CDM “essentially collapsed,” in the words of a U.N.-commissioned report on its future. Weak emissions targets and the economic downturn in wealthy nations had resulted in a 99-percent decline in the price paid for offsets between 2008 and 2013.

cdm graphThere was also evidence that the scheme’s largest projects actually increased greenhouse gas emissions. Add on the tax scandals, fraud, Interpol investigations, and human rights violations, and the scheme had fallen into disarray.

Ci-Dev to the rescue?

Given this record of failure, it’s odd that the World Bank is spending scarce donor resources to convince the world’s poorest countries to buy into the CDM. But that’s exactly what the Bank’s Carbon Initiative for Development (Ci-Dev) proposes to do.

Ci-Dev was launched in 2013 to increase energy access in “least developed” (LDCs) and African countries by funding projects that use clean and efficient technologies through “emission reduction-based performance payments” — in other words, by purchasing carbon credits from them.

But the programme seems to be more about erecting scaffolding around the crumbling CDM than about getting renewable energy to impoverished families.

The Bank lists the following as the initiative’s goals: extending the scope of the CDM in poor countries; demonstrating that carbon credit sales are part of a successful business model; developing “suppressed demand” accounting for LDCs to inflate their emissions baselines to earn more credits; and influencing future carbon market mechanisms so that LDCs get a greater share of the financing.

The Ci-Dev has one programme — the readiness fund — to build countries’ capacities to engage with the carbon market and to experiment with new methods for fast-tracking small-scale CDM projects. It channels millions of dollars into helping create offsets for which there are few buyers.

The initiative has a second programme — the carbon fund — to pay for carbon credits that are eventually produced but don’t sell on the market.

The Bank says it is prioritising support for community and household-level technologies like biogas, rooftop solar, and micro-hydro power. But it will also fund projects in “underrepresented” sectors such as waste management.

Because there’s no clear definition of what types of technologies it can and can’t fund, the Ci-Dev could end up financing electricity from natural gas and other controversial sources of “lower carbon” power.

A better approach

Regardless of technology, it’s irresponsible of the World Bank to spend development dollars on building carbon trading infrastructure in low-income countries for offset projects that have diminishing demand, and whose financial success is linked to a failing international market.

A better approach would be to directly build governance, operational, and financing capacity in the least developed countries for renewable energy infrastructure, alongside providing grant and concessional financing for distributed solar, wind, and small-scale hydropower projects.

The private sector can play a critical role, but the most important businesses to engage are small and medium-sized enterprises that provide mini- and off-grid services to the rural poor.

The paltry climate finance and development assistance being provided by wealthy countries should be spent on what people actually need. Women, children, and small business owners desperately need reliable energy that’s affordable and clean.

It’s a shame that the World Bank is wasting so much time, money, and energy on constructing a market that has little worth and attracts few investors.

Janet Redman is the director of the Climate Policy Program at the Institute for Policy Studies.

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IFC-Negotiated Privately Run Hospital Sapping Lesotho Budget http://www.ipsnews.net/2014/04/ifc-negotiated-privately-run-hospital-sapping-lesotho-budget/?utm_source=rss&utm_medium=rss&utm_campaign=ifc-negotiated-privately-run-hospital-sapping-lesotho-budget http://www.ipsnews.net/2014/04/ifc-negotiated-privately-run-hospital-sapping-lesotho-budget/#comments Mon, 07 Apr 2014 23:12:48 +0000 Carey L. Biron http://www.ipsnews.net/?p=133498 The world’s first hospital to be built and run in a developing country under a public-private partnership is taking up more than half of the health budget in Lesotho, according to new estimates, diverting resources from populations outside of the capital. The unique funding arrangement for the Queen ‘Mamohato Memorial Hospital, which opened in 2011 […]

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By Carey L. Biron
WASHINGTON, Apr 7 2014 (IPS)

The world’s first hospital to be built and run in a developing country under a public-private partnership is taking up more than half of the health budget in Lesotho, according to new estimates, diverting resources from populations outside of the capital.

The unique funding arrangement for the Queen ‘Mamohato Memorial Hospital, which opened in 2011 in the capital city of Maseru, came about under a deal brokered by the International Finance Corporation (IFC), the World Bank’s private sector arm.“It’s very concerning that the deal was structured to give a 25 percent return to a private company – that’s a phenomenally high rate." -- Anna Marriott of Oxfam

Yet while the Washington-based IFC was negotiating on behalf of the Lesotho government, the final agreement will see returns of around 25 percent for the private company running the hospital.

Now, critics from civil society and within the Lesotho government are warning that the contract, which lasts for 18 years, is already forcing officials to cut back on health and other services, particularly for the country’s rural areas – where 75 percent of the Lesotho population lives.

“The big promise was that the new hospital would cost exactly the same as the old hospital and bring better results, but that’s clearly not the case. Even at the point the contract was signed [in 2009], costs had already escalated beyond what was agreed to be affordable,” Anna Marriott, a health policy advisor with Oxfam Great Britain, a humanitarian and advocacy group, told IPS.

“It’s very concerning that the deal was structured to give a 25 percent return to a private company – that’s a phenomenally high rate – and the idea that the World Bank would advise on a deal of that type is truly surprising. It feels as though the IFC was negotiating on behalf of the company rather than the government.”

In a report released Monday, Marriott writes that the new hospital is costing around 67 million dollars a year, three times more than the old hospital. Further, it’s currently accounting for some 51 percent of the country’s health budget, even while rural services are being cut, including for agriculture and education.

“The [new] hospital has had a bad impact on how we’ve allocated resources over the last two years,” the report quotes an anonymous senior Ministry of Health official as stating. “There are less and less resources for primary health care and district services.”

Non-competitive bidding

While the Lesotho government has proposed a significant increase in its health budget for coming years, a large majority – some 84 percent – of this will be earmarked for the new hospital. Yet most people in Lesotho can’t easily make use of these facilities.

“For many people, travelling to urban areas or the capital can take two days or more,” Lehlohonolo Chefa, director of the Lesotho Consumers Protection Association (CPA), which co-authored the new report, told IPS.

“For a long time, the government has been relying on the Christian Health Association of Lesotho to provide most of the primary health-care services in rural areas. But with the advent of this project, the majority of funding goes to financing the federal hospital while sacrificing that primary health care.”

Chefa is in Washington ahead of semi-annual meetings between the World Bank and International Monetary Fund (IMF), which are taking place later this week.

Lesotho is one of the poorest and most unequal countries in the world. The new Queen ‘Mamohato Hospital replaces the country’s previous central health service provider, a century-old institution that nearly everyone agreed needed to be renovated or overhauled entirely.

Yet when the government of Lesotho went to the World Bank to request funding to do so, Oxfam’s Marriot says the bank’s window had already closed for the concessional assistance that would typically be used in such a situation. Instead, officials were pointed towards the IFC, which took over the main technical advisory role for the deal.

That process resulted in a contract between the government of Lesotho and Tsepong, a consortium headed by Netcare, a South African company that has long experience in the private health-care business.

Critics point to a host of problems with the negotiating process and structure of the eventual contract, however, including that only two companies engaged in the bidding process. In addition, the contract significantly underestimated the number of patients the hospital would see, while requiring the government to pay Tsepong for visits over that number.

Further, Tsepong’s priorities are at times at odds with those of the government. Lesotho, for instance, has the world’s third-highest rate of HIV/AIDS, yet CPA’s Chefa says the new hospital has scaled back these services.

“Most of the HIV/AIDS treatments are not provided in the new federal hospital, so people have to look elsewhere,” he says. “For the private sector, HIV/AIDS is not profitable – we’re seeing the same problem with mental health services.”

Landmark model

The deal was quickly lauded by the IFC, which continues to embrace the project’s broader aims.

“The World Bank Group shares Oxfam’s concern that the health network in Lesotho is being overburdened as it attempts to fulfil greater than anticipated public demand for basic health services,” Geoffrey Keele, an IFC spokesperson, told IPS in a statement.

“The World Bank Group is supporting the Government of Lesotho in strengthening the country’s health system so that everyone in Lesotho, especially the poorest, can access the essential health services they need.”

Keele notes that the project has improved the quality of care for around a quarter of the country’s population, while the overall mortality rate at the new hospital has fallen by 41 percent.

Indeed, the IFC started making plans to replicate the project in other countries almost immediately.

“The landmark deal might serve as a model for aging and overburdened health care systems across Africa,” the IFC said in a statement at the time. “The real potential of the Lesotho project becomes apparent if it could be scaled up across populous countries such as Nigeria, where there could conceivably be scope for 20 or more such hospitals.”

Currently, the IFC is advising on similar projects in Nigeria and Benin.

Oxfam is now urging the World Bank to investigate the IFC’s role in the project. Meanwhile, CPA’s Chefa says the Lesotho government will need to renegotiate the contract, but warns that the contract details remain under wraps.

“Renegotiating the contract is the only way out of this mess, and whether that’s possible is based on the government’s and the IFC’s willingness to change,” he says.

“For the moment, there is incredible secrecy around the project. But if this is a flagship project, how can they not be open about what’s in the contract?”

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World Bank to Double Lending to Middle-Income Countries http://www.ipsnews.net/2014/04/world-bank-double-lending-middle-income-countries/?utm_source=rss&utm_medium=rss&utm_campaign=world-bank-double-lending-middle-income-countries http://www.ipsnews.net/2014/04/world-bank-double-lending-middle-income-countries/#comments Tue, 01 Apr 2014 23:27:43 +0000 Carey L. Biron http://www.ipsnews.net/?p=133363 The World Bank is aiming to double its lending to middle-income countries over the coming decade, in addition to expanding its overall commitments to some 70 billion dollars a year. As part of a broad reform agenda unveiled last year by World Bank President Jim Yong Kim, the world’s largest development lender now sees a […]

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World Bank Group President Jim Yong Kim speaks at the Council on Foreign Relations on Apr. 1, 2014. Credit: World Bank/cc by 2.0

World Bank Group President Jim Yong Kim speaks at the Council on Foreign Relations on Apr. 1, 2014. Credit: World Bank/cc by 2.0

By Carey L. Biron
WASHINGTON, Apr 1 2014 (IPS)

The World Bank is aiming to double its lending to middle-income countries over the coming decade, in addition to expanding its overall commitments to some 70 billion dollars a year.

As part of a broad reform agenda unveiled last year by World Bank President Jim Yong Kim, the world’s largest development lender now sees a niche for itself, in part, in responding to the massive infrastructural needs in rising middle-income economies. On Tuesday, Kim lauded this expanded financing “firepower”.“More lending by the bank should not further entrench a culture that measures staff performance on the basis of money out of the door.” -- Nicolas Mombrial

“We now have the capacity to nearly double our annual lending to middle-income countries, from 15 billion dollars to as much as 28 billion dollars a year,” Kim said in a speech to the Council on Foreign Relations, a think tank here.

“This means that the World Bank’s lending capacity, or the amount of loans we can carry on our balance sheet, will increase by 100 billion dollars in the next decade, to roughly 300 billion dollars.”

Kim characterises the prospects as “unprecedented growth” for the bank, based in Washington. The announcements came just ahead of semi-annual meetings between the bank and its sister organisation, the International Monetary Fund (IMF), slated to take place next week here in Washington.

While middle-income countries are expected to require less development assistance, Kim suggests that they will still be interested in accessing the bank’s low-rate loan options, particularly for infrastructure. Kim said infrastructure-related costs for the so-called BRICS middle-income countries alone are around a trillion dollars a year, whereas total global foreign assistance stands at just over a tenth of that figure

This gap, coupled with a new pledge to eliminate extreme poverty by 2030, will now lead the bank to focus in particular on 10 countries. These will include Bangladesh, China, Congo, India and Nigeria, where some two-thirds of the world’s extreme poor are located.

This focus will also take in an additional five countries – Ethiopia, Kenya, Indonesia, Pakistan and Tanzania. Together, these 10 nations house some 80 percent of the world’s poorest people.

“The bank is making use of existing resources more effectively to do not just a little more but a lot more. It’s hard to look at this and not be impressed with what they’re trying to pull off here,” Scott Morris, a senior associate at the Center for Global Development (CDG), a think tank here, told IPS.

“I give them credit both for having some degree of creativity and for navigating the politics with shareholders to pull these elements off. The issue of loan pricing is always very sensitive with borrowers.”

Questionable rejiggering

The new capacity comes on top of a record top-up for the World Bank’s fund for the world’s poorest countries, known as the International Development Association (IDA), which last year took in close to 52 billion dollars from its membership.

Yet unlike the IDA replenishment, the newly announced boosts will come largely from rejiggering the bank’s own lending rules, as well as from strengthening efficiency within its operations. “We are not getting a capital increase … we’re stretching our balance sheet as much as we possibly can,” Kim said Tuesday.

For instance, the bank will raise the limit imposed on the size of loans that each middle-income country is able to take out, by another 2.5 billion dollars. It will also be slightly increasing the interest rate imposed on those loans, as well as certain other fees.

Alongside these changes, Kim on Tuesday reiterated a new goal of saving 400 million dollars over three years through increased efficiency within the organisation, details of which are to be publicised in coming days.

CGD’s Morris, who previously oversaw engagement between the U.S. Treasury and the World Bank, says this plan is impressively inventive but could also be dangerous in the longer term.

“The bank is now sending a clear signal that they don’t feel the need to ask for more money from their shareholders, particularly from the United States and Europe,” he says.

“But this is an institution owned by country shareholders, and an important measure of their engagement with and attachment to the institution is its financial flows. If, for instance, U.S. financing continues on a steady decline, I think the relationship itself could also be on that kind of trajectory – and that would be unfortunate.”

The changes to the borrower limit and the new surcharge for large countries raise questions about how some of the smaller countries will fare, Morris worries. He also notes that much will depend on how the new budget cuts take place.

“If they’re pursuing budget cuts first and foremost to address the problem of budget bloat, then that’s absolutely necessary,” he says. “But if the starting point is to figure out how to find 400 million dollars to put towards increased lending, then you have to worry that they’re going to be cutting in areas that they shouldn’t be.”

Added responsibility

Others, too, are calling for the World Bank to use the new reforms and goals as an opportunity to strengthen the criteria by which it rates the effectiveness of its own lending. The bank has long been criticised for focusing too much on the size of its lending rather than on the ultimate impact of that spending on reducing poverty.

“More lending by the bank should not further entrench a culture that measures staff performance on the basis of money out of the door,” Nicolas Mombrial, head of the Washington office of Oxfam International, an anti-poverty group, said Tuesday. “Development impact should be front and centre for the bank.”

Mombrial also notes that expanded development lending will require a strengthening of guidelines covering World Bank lending, in order to ensure that those programmes do not negatively impact on local communities and the environment.

“More money for development is good but the quality of World Bank lending needs to improve. This will be bad news for poor people if World Bank social and environmental standards are not improved,” he says.

“The bank’s private sector arm, the IFC, must be reformed if it wants to spend more and increase its development impact. More resources must be tied to better consultation and protection of communities affected by IFC investments.”

Worrying for some in this regard will be strongly positive comments Kim made Tuesday regarding new World Bank funding for a controversial hydroelectric dam on the Congo River, known as Inga III. Civil society groups have fiercely opposed the megaproject, but Kim lauded it as a prime example of the bank’s “bold” future plans.

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World Bank Clears Congo’s Controversial Dam Project http://www.ipsnews.net/2014/03/world-bank-clears-congos-controversial-dam-project/?utm_source=rss&utm_medium=rss&utm_campaign=world-bank-clears-congos-controversial-dam-project http://www.ipsnews.net/2014/03/world-bank-clears-congos-controversial-dam-project/#comments Fri, 21 Mar 2014 00:04:19 +0000 Jim Lobe http://www.ipsnews.net/?p=133133 The World Bank Thursday approved a 73.1-million-dollar grant in support of a controversial giant dam project in the Democratic Republic of the Congo (DRC). With another 33.4 million dollars approved by the African Development Bank late last year, the grant, which is being provided by the Bank’s soft-loan affiliate, the International Development Association (IDA), will […]

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By Jim Lobe
WASHINGTON, Mar 21 2014 (IPS)

The World Bank Thursday approved a 73.1-million-dollar grant in support of a controversial giant dam project in the Democratic Republic of the Congo (DRC).

With another 33.4 million dollars approved by the African Development Bank late last year, the grant, which is being provided by the Bank’s soft-loan affiliate, the International Development Association (IDA), will be used to help establish the legal framework and state authority that will oversee the dam’s construction and operations.“If leaders of emerging economies are truly interested in the welfare of their citizens, they are better off laying grand visions of mega-dams aside.” -- Atif Ansar

It will also finance a number of environmental and social assessments to shape the development of the multi-billion dollar Inga 3 Basse Chute (BC) dam project.

“By being involved in the development of Inga 3 BC from an early stage we can help ensure that its development is done right so it can be a game changer by providing electricity to millions of people and powering commerce and industry,” said Makhtar Diop, the Bank’s vice president for Africa.

“Supporting transformative projects that expand people’s access to electricity is central to achieving the World Bank Group’s twin goals of helping to end extreme poverty and boosting shared prosperity,” he added.

But the Bank’s support for the project drew criticism from some environmental and civil-society groups that have long opposed a project that is expected to cost at least 14 billion dollars.

“By approving Inga 3, the World Bank shows it has not learnt lessons from the bad experience of previous dams on the Congo River despite its claims to the contrary,” according to Rudo Sanyanga, Africa Director of the California-based International Rivers (IR).

“The Bank is turning a blind eye to the DRC’s poor governance and is taking short-cuts to the environmental assessment of the project,” he added.

That view was echoed by Maurice Carney, executive director of the Friends of the Congo, a Washington-based organisation with ties to community and environmental groups in the DRC.

“We see this decision as consistent with past World Bank projects that wind up as white elephants,” he told IPS. “There are a number of other alternatives for developing the DRC’s enormous energy capacity, including solar, wind, smaller-scale hydro and biofuel.

“The project is being presented as if it will help the population, but more often than not, these big dam projects end up serving industry at the expense of local communities many of which will be displaced once Inga 3 is fully developed.”

As currently envisioned, the Inga III dam would be the first in a series of hydroelectric installations along the Congo River, collectively referred to as the Grand Inga project. This would include a single 145-metre dam, which would flood an area known as the BundiValley, home to around 30,000 people.

The full project could provide up to 40,000 megawatts of electricity, a power potential that has been eyed hungrily by the rest of the continent for decades.  The DRC’s total hydropower potential is estimated to be the third largest in the world after China and Russia.

While DRC’s chaotic governance, however, has stymied forward progress on the project for years, the Grand Inga vision received an important boost last year when the South African government agreed to purchase a substantial amount of power produced by Inga III.

The dam is now supposed to be built by 2020 and, according to Congolese government estimates from November, would produce around 4,800 MW of electricity. Of this, 2,500 MW would go to South Africa while another 1,300 MW would be earmarked for use by mines and related industry in the province of Katanga.

Construction is scheduled to begin by 2016. The Bank will rely heavily on its private-arm facility, the International Finance Corporation, to help DRC’s government establish an autonomous Inga Development Authority which will, among other things, be charged with deciding on construction bids and negotiating purchasing deals for the electricity generated by the dam.

According to Peter Bosshard, IR’s director, the selection of the contractor to build the dam could prove problematic.

He told IPS three consortia are currently in the running: SinoHydro and China Three Gorges Corporation from China, a Canadian-Korean consortium, and a third made up primarily of Spanish companies.

But one of the Canadian companies involved has been barred from receiving any support from by the Bank for past corruption, while SinoHydro has been suspended pending the outcome of a corruption investigation by the Bank, according to Bosshart.

“This means that, unless the DRC government picks the Spanish consortium, it won’t be able to get any World Bank Group loans for the actual construction,” he noted.

That could be a problem. According to Bernard Sheahan, the IFC’s director of infrastructure and natural resources, “the level of investment for Inga 3 BC is so high that neither the public sector nor the private sector alone could finance the full cost of development of the project.”

Huge hydro-electric dams have long been a controversial issue at the Bank which, for most of its history, was an enthusiastic supporter.

Protests by local communities and international human rights and environmental groups that documented the massive displacements and environmental damage these mega-dams often caused – not to mention their failure to deliver electricity to those most in need – resulted in a halt in approving new projects in the mid-1990s.

Indeed, while the 50-year-old Inga 1 and 2 dams were supposed to provide power to much of the country, only ten percent of DRC households have electricity.

Earlier this year, the U.S. Congress passed a landmark new law requiring the U.S. Treasury, which represents Washington on the Bank’s board, to vote against multilateral funding for large-scale hydro-electric projects in developing countries.

The U.S. representative abstained on the vote Thursday, according to knowledgeable sources.

Earlier this month, four researchers at Oxford Unversity Said Business School released a major study based on data from 245 large dams built since 1934 in 65 different countries.

It found that they suffered average cost overruns of more than 90 percent and delays of nearly 50 percent inflicting huge additional costs in inflation and debt service for the mostly public entities that built them.

“Proponents of mega-dams tend to focus on rare stories of success in order to get their pet projects approved,” said Atif Ansar, one of the Oxford researchers. “If leaders of emerging economies are truly interested in the welfare of their citizens, they are better off laying grand visions of mega-dams aside.”

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Carbon-Cutting Initiative May Harm Indigenous Communities http://www.ipsnews.net/2014/03/carbon-cutting-initiative-may-harm-indigenous-communities/?utm_source=rss&utm_medium=rss&utm_campaign=carbon-cutting-initiative-may-harm-indigenous-communities http://www.ipsnews.net/2014/03/carbon-cutting-initiative-may-harm-indigenous-communities/#comments Thu, 20 Mar 2014 23:35:29 +0000 Bryant Harris http://www.ipsnews.net/?p=133131 Civil society and advocacy groups are warning that a prominent carbon-reduction initiative, aimed at curbing global emissions, is undermining land tenure rights for indigenous communities, putting their livelihoods at risk. On Wednesday, an international dialogue here focused on the Reducing Emissions from Deforestation and Degradation Plus (REDD+) programme, overseen primarily by the United Nations and […]

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U.S. Native American leader Tom Goldtooth. Credit: Franz Chávez/IPS

U.S. Native American leader Tom Goldtooth. Credit: Franz Chávez/IPS

By Bryant Harris
WASHINGTON, Mar 20 2014 (IPS)

Civil society and advocacy groups are warning that a prominent carbon-reduction initiative, aimed at curbing global emissions, is undermining land tenure rights for indigenous communities, putting their livelihoods at risk.

On Wednesday, an international dialogue here focused on the Reducing Emissions from Deforestation and Degradation Plus (REDD+) programme, overseen primarily by the United Nations and World Bank.“As the carbon in living trees becomes another marketable commodity, the deck is loaded against forest peoples." -- Arvind Khare

The Rights and Resources Initiative (RRI), a coalition of organisations focused on land tenure and policy reforms, presented new research highlighting the lack of legal protection and safeguards for indigenous communities living in forests.

“As the carbon in living trees becomes another marketable commodity, the deck is loaded against forest peoples and presents an opening for an unprecedented carbon grab by governments and investors,” said Arvind Khare, RRI’s executive director.

“Every other natural-resource investment on the international stage has disenfranchised indigenous peoples and local communities, but we were hoping REDD would deliver a different outcome. Their rights to their forests may be few and far between, but their rights to the carbon in the forests are non-existent.”

REDD+ provides a series of financial incentives and rewards for developing countries to reduce their carbon emissions resulting from deforestation.

The World Bank plays an active role in REDD+ through its Forest Carbon Partnership Facility (FCPF) and the Forest Investment Programme (FIP), both of which are designed to encourage better forest conservation and stewardship.

However, watchdog groups say Latin American, African and Asian indigenous communities living in forests have yet to receive any REDD+ revenue streams from their respective governments.

“There has been no transfer of funds to the [indigenous] communities through the governmental REDD processes,” Khare told IPS. “And therefore, in most of these countries … no money has been transferred to the communities through these two major bodies [REDD+ and FCPF], which are actually piloting REDD in the world.”

RRI’s new research, which examines 23 countries, finds that only Mexico and Guatemala have laws meant to clarify tenure rights over carbon. Meanwhile, none of the countries have a legal framework or institutions in place to determine who receives REDD+ benefits for carbon emission reductions.

One-eighth the deforestation

In order to ensure that indigenous communities receive an appropriate share of the financial benefits from REDD+, many of the participants at Wednesday’s dialogue called on the programme’s overseers to explicitly link carbon rights with land tenure rights.

“Tenure must be a centrepiece of REDD …That recognition of local rights is essential to the viability of carbon markets,” said Alexandre Corriveau-Bourque, a tenure analyst at RRI.

“These observations are based not only on moral or legal grounds but on a growing body of academic literature demonstrating that communities with secure tenure have proven that they promote the permanence of forest carbon” – essentially, preventing deforestation – “often achieving better outcomes than state-protected areas.”

For instance, in areas of the Amazon where the land ownership rights of indigenous communities are respected and legally protected, the rate of deforestation is only one-eighth of the level in areas not under indigenous control.

When land tenure rights are not clearly recognised or legally protected, however, the potential for violent conflict, state repression and heightened deforestation increases.

“It’s also clear that insecure, unclear and unrecognised community tenure rights can lead to conflict and deforesting activities,” Corriveau-Bourque continued. “If governments decide that carbon is a public good and claim exclusive state ownership, as many have with mineral resources … it will add another layer of contestation and conflict in an already crowded field.”

In 2002, New Zealand declared state ownership of its carbon supplies, which actually resulted in an increase in deforestation. As a result, the government has since reformed the law to adapt a policy that gives communities and individuals more freedom to engage in the carbon trade.

According to RRI, 15 of the 21 countries with national planning documents for REDD+ noted that a major cause of deforestation and forest degradation was the absence of clear tenure policies.

Misattributed blame

In addition to the lack of clear land tenure rights, some analysts believe that the implementation of REDD+ will be detrimental to indigenous people as governments seek to misattribute and direct blame for deforestation towards local communities, rather than on the corporate interests operating in fragile forest ecosystems.

“The message coming from forest peoples is that they are being pressed from both sides,” Tom Griffiths, a coordinator with the Forest Peoples Programme, an advocacy group, told IPS.

“On the one hand, their forests are being given out without their knowledge and agreement to foreign companies for agricultural development and oil extraction. And on the other, they’re being pressed by these same climate initiatives, which are actually limiting their access to the forest.”

Griffiths suggested that the industrial sector is largely responsible for driving deforestation in many countries, but that subsistence farmers and poor people often get the blame.

He also notes that some analysts have characterised traditional rotational farming as “slash and burn” agriculture.

“There’s a deep prejudice in forest policymaking, and indeed the forest profession, against so-called slash and burn agriculture,” said Griffiths. “In fact, there’s a large amount of science to show that, with the right conditions, it is a fully sustainable form of land use and in fact can even enrich forest ecosystems.

“We’re very concerned that some of these REDD policies, forest climate policies, are not paying adequate attention to these obligations to protect customary rights to land and crucial customary systems or ways of using the land.”

Earlier this month, indigenous groups from around the world held an international conference on deforestation and local rights in Palangka Raya, Indonesia.

In addition to singling out agribusiness, infrastructure as well as mineral and energy extraction, they called for a halt to “green economy” projects, which they argued prohibit forest peoples’ “fundamental rights”.

In a declaration, the conference organisers directly criticized REDD+ both for its lack of progress on emissions reduction and for the restrictions it imposes on the rights of indigenous forest peoples to use their land.

“Global efforts promoted by agencies like the United Nations Framework Convention on Climate Change (UNFCCC), [REDD+] and the World Bank to address deforestation through market mechanisms are failing,” states the communiqué.

“Not just because viable markets have not emerged, but because these efforts fail to take account of the multiple values of forests and, despite standards to the contrary, in practice are failing to respect our internationally recognised human rights.”

Furthermore, the declaration indicated that organisations collaborating on initiatives like REDD+ have implemented development programmes that have themselves contributed to deforestation:

“Contradictorily, many of these same agencies are promoting the take-over of our peoples’ land and territories through their support for imposed development schemes, thereby further undermining national and global initiatives aimed at protecting forests.”

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U.S. Ukraine Aid Frustrated by IMF Reform Debate http://www.ipsnews.net/2014/03/u-s-ukraine-aid-frustrated-imf-reform-debate/?utm_source=rss&utm_medium=rss&utm_campaign=u-s-ukraine-aid-frustrated-imf-reform-debate http://www.ipsnews.net/2014/03/u-s-ukraine-aid-frustrated-imf-reform-debate/#comments Sat, 15 Mar 2014 00:21:09 +0000 Jim Lobe http://www.ipsnews.net/?p=132902 Despite pressure from the Barack Obama administration, Ukraine’s new prime minister, and a veritable who’s who in Washington’s foreign policy and financial establishment, Congress adjourned Friday for a 10-day recess without approving emergency assistance for an increasingly beleaguered and economically bereft Ukraine. The failure to pass a billion-dollar package of loan guarantees – just two […]

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By Jim Lobe
WASHINGTON, Mar 15 2014 (IPS)

Despite pressure from the Barack Obama administration, Ukraine’s new prime minister, and a veritable who’s who in Washington’s foreign policy and financial establishment, Congress adjourned Friday for a 10-day recess without approving emergency assistance for an increasingly beleaguered and economically bereft Ukraine.

The failure to pass a billion-dollar package of loan guarantees – just two days before a Moscow-backed plebiscite in Crimea is expected to endorse secession from Ukraine and integration with Russia – resulted largely from Republican opposition to reforming the International Monetary Fund (IMF), the Washington-based multilateral agency that is expected to take the lead in any rescue of Kiev’s debt-ridden economy.The reform is part of a larger movement to make the governance of major international institutions more representative by providing a stronger voice for middle-income countries, in particular.

While the Democrat-led Senate Foreign Relations Committee combined both the aid and the IMF reform package, Republican leaders in the House, which passed the aid package as a stand-alone measure last week, said they opposed adding the IMF provisions, which, among other measures, would permit the Fund to lend more money to needy clients, including Ukraine.

“I understand the administration wants the IMF money, but it has nothing at all to do with Ukraine,” said House Speaker John Boehner just as the Senate was poised to pass its version of the emergency bill.

He spoke after Secretary of State John Kerry exhorted lawmakers to approve the Senate package during a hearing Thursday before flying off for his latest – and apparently inconclusive – meeting on the Ukraine crisis with Russian Foreign Minister Sergei Lavrov in London Friday.

“We must have IMF reform, we must have the quota,” he said in a reference to the increase in Ukraine’s ability to borrow more from the Fund if the package goes through. “It would be a terrible message to Ukraine for everybody to be standing up talking, appropriately, about what’s at stake and not to be able to follow through.”

He was backed up by a letter sent to the Congressional leadership by more than two dozen former cabinet officials, including former national security advisers Henry Kissinger, Brent Scowcroft, Zbigniew Brzezinski, and Condoleezza Rice, and former Treasury Secretaries Robert Rubin, Larry Summers, and Robert Zoellick, among many others.

“The immediate importance of a strong IMF role for countries in crisis is apparent now in Ukraine, which seeks help from the U.S. and IMF to maintain its independence and economic health,” according to the letter. “Implementation of IMF quota reform would mean Ukraine would be able to borrow 60 percent more in rapid IMF financing (from one billion dollars to 1.6 billion dollars) than is possible today.”

Coupled with other aid, the letter, which was coordinated by the Bretton Woods Committee, asserted, the “geopolitical position” of its government in dealing with the current crisis with Russia should be enhanced.

The IMF reform package, which was adopted by the Fund’s governing board in 2010, cannot take formal effect until the U.S. approves it given the effective veto power Washington wields in the agency.

In addition to providing the Fund with additional lending resources, its main effect would be to reallocate countries’ quotas to increase the currently underweighted influence of emerging economies, such as Brazil, China, India, and Turkey, while decreasing the cumulative share of European members whose representation on the board – and whose access to the IMF’s lending facilities, especially in the wake of the eurocrisis — far exceeds their actual share of the global economy.

Spain, for instance, has voting shares similar in size to Brazil’s, despite the fact that the Spanish economy is less than two-thirds of Brazil’s. Of the 24 seats on the IMF’s executive board, at least eight are held by European governments at any one time.

The reform is thus part of a larger movement to make the governance of major international institutions more representative by providing a stronger voice for middle-income countries, in particular.

The Obama administration has played a significant role in this effort, heralding it as the kind of governance reform of global institutions that is essential for the international system of the 21st century, as the legacies of imperialism and colonialism of the previous two centuries fade into history.

Administration officials have applied some of the same reasoning in response to Russia’s de facto occupation of Crimea.

“You just don’t in the 21st century behave in 19th century fashion by invading another country on (a) completely trumped up pretext,” Kerry said earlier this month as the crisis unfolded.

But most Republican lawmakers have resisted Obama’s version of 21st century global governance, particularly when it comes to the reform of international institutions like the IMF, preferring instead to maintain the status quo ante, even if it results in delays at a critical moment in desperately needed financial aid to Ukraine.

Two senators who voted against the bill in the Foreign Relations Committee, including two likely 2016 Republican presidential candidates, Rand Paul and Marco Rubio, noted that Russia’s IMF quota would be increased – if only from 2.5 percent to 2.7 percent – if the reform took effect.

“This legislation is supposed to be about assisting Ukraine and punishing Russia, and the IMF measure completely undercuts both of these goals by giving Putin’s Russia something it wants,” Rubio argued. Paul noted that any loans provided to Ukraine would probably be used to repay Moscow for billions of dollars in debts it accumulated by importing Russian gas.

House Republicans have also objected to the reforms because they would double Washington’s contribution quota to 63 billion dollars, although that amount would have no direct budgetary impact because it would be shifted from Washington’s share of an emergency fund created by the IMF to cope with the 2008 financial crisis to the agency’s general fund.

Republicans, however, counter that the U.S. won’t be able to exercise as much influence over loans from the general fund and have expressed concern that some of the U.S. funding could be on the hook if European countries to which the IMF has lent many times their quota default.

But the Bretton Woods letter stressed that Washington’s clout – both in financial and foreign-policy terms – in dealing with Ukraine and other hot spots would be enhanced by approval of the reforms, pointing out that when Russia went to war with George in 2008, the IMF helped prevent an economic collapse in Tbilisi, just as it supported Easter European countries after the fall of the Berlin Wall.

“An undeniable fact is that the IMF has been a vital tool in every administration’s foreign policy arsenal since the Fund’s inception,” said the Committee’s director, Randy Rodgers.

In another letter sent to Boehner earlier in the week by the Committee and the activist New Rules for Global Finance Coalition, nearly 200 policy experts, business and academic leaders, and former U.S. officials also called for passage of the IMF reform provisions.

In addition to the New Rules Coalition, officials from a number of anti-poverty groups that have been critical of IMF austerity programmes, such as Oxfam America, a dozen church groups, and Jubilee USA network, signed the letter, calling the quota reform a step toward greater democratisation of the Fund.

“We know we can’t do anything additional in terms of governance reform until this passes,” New Rules’ director Jo Marie Griesgraber told IPS. “This begins to wear down the European over-representation …and enables Ukraine to double its quota.”

Several Republicans on the Senate Foreign Relations Committee also deplored the failure of their House colleagues to support the bill.

The IMF “can provide stability at a time we need it,” said Sen. Lindsey Graham, one of the most prominent anti-Moscow hawks in the Senate. Calling it a “strategic tool” for U.S. foreign policy, he said, “We would be short-sighted to not embrace this reform.”

Jim Lobe’s blog on U.S. foreign policy can be read at Lobelog.com.

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IMF Urges Redistribution to Tackle Growing Inequality http://www.ipsnews.net/2014/03/imf-urges-redistribution-tackle-growing-inequality/?utm_source=rss&utm_medium=rss&utm_campaign=imf-urges-redistribution-tackle-growing-inequality http://www.ipsnews.net/2014/03/imf-urges-redistribution-tackle-growing-inequality/#comments Thu, 13 Mar 2014 22:14:48 +0000 Carey L. Biron http://www.ipsnews.net/?p=132841 The International Monetary Fund (IMF) is wading strongly into the global debate over the impact of growing income inequality, offering a series of controversial findings that push back on long-held economic orthodoxy – of which the fund itself has long been a key proponent. The IMF, arguably the world’s premiere financial institution, is stating unequivocally […]

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Biomass is the basic source of fuel for many in the southern Mexican state of Chiapas. Credit: Mauricio Ramos/IPS

Biomass is the basic source of fuel for many in the southern Mexican state of Chiapas. Credit: Mauricio Ramos/IPS

By Carey L. Biron
WASHINGTON, Mar 13 2014 (IPS)

The International Monetary Fund (IMF) is wading strongly into the global debate over the impact of growing income inequality, offering a series of controversial findings that push back on long-held economic orthodoxy – of which the fund itself has long been a key proponent.

The IMF, arguably the world’s premiere financial institution, is stating unequivocally that income inequality “tends to reduce the pace and durability” of economic growth. In a paper released Thursday, the fund also suggests that a spectrum of approaches to “progressive” redistribution – national tax and spending policies that are purposefully tilted in favour of the poor – would decrease inequality and hence “is overall pro-growth”.“This is the final judgment on inequality being bad for growth.” -- Nicolas Mombrial

“This is the final judgment on inequality being bad for growth,” Nicolas Mombrial, a spokesperson for Oxfam, a humanitarian group, told IPS in a statement.

“The IMF’s evidence is clear: The solutions to fighting inequality are investing in health care and education, and progressive taxation. Austerity policies do the opposite, they worsen inequality … We hope this signals a long-term change in IMF policy advice to countries – to invest in health and education and more progressive fiscal policies.”

For the past half-century, the Washington-based IMF has operated as the world’s “lender of last resort” for failing economies. In return for offering short-term loans to governments in economic crisis, the fund typically demands the imposition of a range of often stringent austerity measures aimed at solidifying the country’s finances.

After years of frustration over these conditions by anti-poverty campaigners, the IMF has recently engaged in a broad reappraisal of this approach. In November, the fund proposed an overhaul of its debt-restructuring guidance, though formal introduction of this proposal has now been pushed back to June, following pushback.

“Although the main points are not new, the IMF paper is nonetheless significant because the organisation has typically been at the more conservative end in its policy advice – from being seen to restrict measures that would ameliorate the worst impacts of crises on those in deepest poverty, for example, to promoting quite damagingly regressive changes to tax systems in their country advice,” Alex Cobham, a research fellow with the London office of the Center for Global Development (CGD), a think tank based here, told IPS.

“Nonetheless, we should not expect massive or immediate changes in IMF policy. The situation of tax policy demonstrates very well how the organisation can continue to promote in-country the same approaches that their own research has discredited.”

Hot subject

The new advice on income inequality will likely be received sceptically in many corners, though the fund is giving the findings its full backing. While Thursday’s release came in the form of a staff paper, the report was given a high-profile rollout here, including an introduction from the fund’s second-highest official, David Lipton.

“Some may be surprised that the fund is engaging in this debate on the design of redistributive policies … [but] one reason why we are discussing this issue today is it’s becoming a hot subject,” Lipton, the fund’s first deputy managing director, said Thursday at the report’s unveiling.

“The interest in redistribution, as reflected in public surveys and our discussions with our members, shows that interest is higher than in the past. Our members want to explore with us how they can pursue distributive policies in an efficient manner.”

The IMF is quick to note that the new paper, which builds on a research note released last month, constitutes not recommendations but rather advice to its 188-country membership, while country-specific design for any redistributive mechanism remains of paramount importance. Nonetheless, the “efficient” options it is offering to both developing and developed governments consider are striking.

These include placing higher taxes on the rich than on other segments of society, as well as strengthening property taxes, potential for which the fund says is particularly significant in developing countries. It also suggests considering increasing the age at which citizens become eligible for pensions and other state old-age programmes.

Many of these suggestions have long been pushed by development advocates as well as global labour-rights activists.

“We’re pleased that the IMF has finally caught up with what the global union movement has been saying for years – that inequality is the number one threat to the economic recovery,” Philip Jennings, the general secretary of UNI Global Union, said in a statement. “The only way out of this crisis is inclusive, sustainable economic growth with a living wage for all.”

CGD’s Cobham says the paper will give support to policymakers who want to tackle inequality, and could serve as the basis for a broader global agreement on the issue.

“It may in fact mark an important moment in establishing the breadth of the consensus that reducing income inequality should be one of the targets of the post-2015 framework that will succeed the Millennium Development Goals,” he says.

Greatest risk

A half-decade since the start of the global economic crisis, inequality has risen to the top of global agendas.

In January, the World Economic Forum warned that the growing gap between rich and poor, brought about by globalisation, constituted “the most likely risk to cause an impact on a global scale in the next decade”. The previous month, President Barack Obama likewise stated that income inequality is “the defining challenge of our time”.

Much of this new focus is because the global concentration of wealth that has taken place over the past three decades has increased in recent years, and today stands at modern record levels. According to analysis by Credit Suisse, just one percent of the global population owns around half of the world’s wealth.

According to the new IMF paper, this trend is particularly pronounced in the West, especially in the United States. In developing countries, income inequality has been growing in the Middle East and North Africa, though recently it has begun to decrease in sub-Saharan Africa and, particularly, in Latin America.

Despite this recent downward trend, however, Latin America retains one of the highest levels of inequality of any region.

While the fund points to a variety of social spending as a key way to reduce these levels, the IMF’s Lipton warns that such spending needs to be better designed or risk increasing inequality.

“Fiscal policy has played a major role in reducing inequality in the past and is the primary tool available for governments to affect income distribution,” he said Thursday. “Whether these policies help, or hurt growth, is all a matter of design.”

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Arab NGOs Warn IMF Against Sharp Cuts to Subsidies http://www.ipsnews.net/2014/02/arab-ngos-warn-imf-sharp-cuts-subsidies/?utm_source=rss&utm_medium=rss&utm_campaign=arab-ngos-warn-imf-sharp-cuts-subsidies http://www.ipsnews.net/2014/02/arab-ngos-warn-imf-sharp-cuts-subsidies/#comments Fri, 28 Feb 2014 16:06:56 +0000 Jim Lobe http://www.ipsnews.net/?p=132294 Civil society activists from five Arab countries are urging the International Monetary Fund (IMF) to ease pressure on their governments to reduce food and fuel subsidies until stronger social-protection schemes and other basic reforms are implemented. In a new report, the Arab NGO Network for Development (ANND) and the Egyptian Center for Economic and Social […]

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By Jim Lobe
WASHINGTON, Feb 28 2014 (IPS)

Civil society activists from five Arab countries are urging the International Monetary Fund (IMF) to ease pressure on their governments to reduce food and fuel subsidies until stronger social-protection schemes and other basic reforms are implemented.

In a new report, the Arab NGO Network for Development (ANND) and the Egyptian Center for Economic and Social Rights (ECESR) argue that social safety nets in Egypt, Jordan, Morocco, Tunisia, and Yemen are inadequate – or, in some cases, too corrupt — to compensate for the loss of critical subsidies on which the poor and even the middle class depend."The pressure should be on the global community that is pushing these austerity measures without considering the actual context or impact on low-income people." -- Leila Hilal

Indeed, in the absence of stronger safety nets, even the gradual removal of subsidies for key commodities may contribute to continuing unrest across the region as the three-year-old “Arab Awakening” plays out, according to the 20-page report.

“In the near term, the unwinding of subsidies cannot serve as the panacea for the serious budgetary and fiscal difficulties facing most Arab states,” according to the report, which was released here Thursday by the Middle East Task Force of the New America Foundation (NAF), a non-partisan think tank.

“By continuing to press Arab governments to remove subsidies, the IMF has inadequately responded to the sweeping social and political changes stemming from the 2011 uprisings and subsequent period of unrest,” it said.

The report also called on the IMF to urge national governments to take other measures, notably instituting progressive tax systems and cutting the military budget, in order to increase revenues and cut spending. Governments must also be encouraged to consult more with civil-society organisation (CSOs), labour unions, and local authorities regarding economic-reform programmes, according to the report.

Jo Marie Griesgraber, who directs New Rules for Global Finance Coalition, welcomed the report, saying it was the latest indication of growing interest by grassroots groups both in the Arab world and in other countries in transition, such as Ukraine and Burma, in the IMF and of their understanding that national economic problems need to be addressed at the global level.

At the same time, she noted that the authors may be overstating the leverage the IMF enjoys over national governments with which it is required under its charter to negotiate agreements.

Bakeries struggled to produce bread in the face of Egypt's 2011 wheat shortage. Credit: Emad Mekay/IPS

Bakeries struggled to produce bread in the face of Egypt’s 2011 wheat shortage. Credit: Emad Mekay/IPS

“I’m sure, if given a choice, the IMF would prefer that reducing subsidies would not be the first policy option they would want to implement to reduce deficits,” she told IPS. “It’s a government policy, and the government is going to agree to cut subsidies to the poor before it agrees to cut military expenditures.”

“The IMF can’t do everything; you need the World Bank; you need regional banks; you need an international court to throw corrupt officials in jail; you need a national political commitment for people to pay taxes,” she said. “The IMF is too limited in what it alone can do, although it serves as a convenient scapegoat for governments.”

Leila Hilal, NAF’s Middle East task force director, agreed that states “are engaging the IMF bilaterally without consulting the affected populations.”

With the recent uprisings, she told IPS in an interview from Jordan, “people feel that their voices are more valuable, that they have more agency, and that there’s much more at stake in terms of policy, and they want to be heard.

“So the idea is that the pressure should be on the global community that is pushing these austerity measures without considering the actual context or impact on low-income people,” she said.

While the mass demonstrations, violence, and political upheavals across the Arab world continue to capture the headlines, relatively little attention has been paid to the underlying economic problems that many analysts believe lie at the root of the continuing regional turbulence.

The Washington-based IMF, which is dominated by the wealthy Western nations, has long been involved in the Middle East/North Africa (MENA) region, particularly in the five low- and middle-income countries that are the subject of the report.

The lender of last resort for failing economies, it provides short-term loans that are subject to recipient governments’ compliance with conditions designed to reduce, if not eliminate their fiscal deficits.

Over much of its history, it acquired a controversial reputation for pushing severe austerity on governments as part of “structural adjustment” programmes which hit the poor and most vulnerable sectors of society the hardest, often as a result of cuts to food and fuel subsidies, as well as social services, including health and education.

The IMF said it was unable to comment before deadline.

Cuts in subsidies have been particularly controversial because of their immediate impact on the population. In 1977, for example, a cut in bread subsidies in Egypt provoked widespread unrest, as did Jordan’s attempts cut subsidies in 1989 and again in 1996. When the IMF sent a mission to Egypt in April last year, it was greeted with protests by civil-society groups, labour unions, and political parties anticipating that the agency would demand similar cuts as a condition for much-needed loans.

In much of the region, food and fuel subsidies make up a large percentage of government spending; in 2012, for example, they accounted for 10 percent of the Egyptian budget.

As the report itself notes, the Fund – as well as its development sister agency, the World Bank — has become increasingly sensitive to these criticisms and sought to persuade governments with which it negotiates the loan conditions to mitigate the impact on the poor by reducing subsidies more gradually and, with the Bank’s help,  strengthening social-safety nets for the most vulnerable.

But the report, which was based on interviews with more than a dozen prominent civil-society activists from the five countries, as well as analyses of IMF staff reports and other IMF documents, argues that these efforts are sometimes based on faulty assumptions.

“Theoretically, the IMF proposes the expansion of social safety nets as a way to offset the negative impact of subsidy removal on the poor,” it said. “In practice, however, social protection schemes are underdeveloped and often nonexistent in Arab countries, and are thus incapable of cushioning the poor against rising prices. In many instances, corruption and the absence of transparency mechanisms further complicate the task of distribution social welfare benefits.”

“Subsidy reform should only occur upon the establishment of sustainable and comprehensive social protection schemes, and can only proceed with broad support from a variety of stakeholders,” according to the report.

“Our analysis highlights the need for the IMF and the G8 countries to adapt their advice to the changing political and socio-economic conditions in the Arab region,” said NAF’s Abdulla Zaid, one of four the report’s co-authors. “The Fund’s one-size-fits-all advice prioritising fiscal austerity measures over social and economic rights fails to account for the harmful impact subsidy removal would have on low and middle-income individuals, and thus, stability.”

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Indoor Mini-Farms to Beat Climate Change http://www.ipsnews.net/2014/02/indoor-food-gardens-beat-climate-change/?utm_source=rss&utm_medium=rss&utm_campaign=indoor-food-gardens-beat-climate-change http://www.ipsnews.net/2014/02/indoor-food-gardens-beat-climate-change/#comments Thu, 27 Feb 2014 18:29:31 +0000 Jewel Fraser http://www.ipsnews.net/?p=132201 Industrial engineer Ancel Bhagwandeen thinks that growing your food indoors is a great way to protect crops from the stresses of climate change. So he developed a hydroponic system that “leverages the nanoclimates in houses so that the house effectively protects the produce the same way it protects us,” he says. Bhagwandeen told IPS that […]

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Ancel Bhagwandeen with his hydroponic unit for growing vegetables indoors. The unit makes use of smart electronics. Credit: Jewel Fraser/IPS

Ancel Bhagwandeen with his hydroponic unit for growing vegetables indoors. The unit makes use of smart electronics. Credit: Jewel Fraser/IPS

By Jewel Fraser
PORT OF SPAIN, Trinidad, Feb 27 2014 (IPS)

Industrial engineer Ancel Bhagwandeen thinks that growing your food indoors is a great way to protect crops from the stresses of climate change. So he developed a hydroponic system that “leverages the nanoclimates in houses so that the house effectively protects the produce the same way it protects us,” he says.

Bhagwandeen told IPS that his hydroponic project was also developed “to leverage the growth of the urban landscape and high-density housing, so that by growing your own food at home, you mitigate the cost of food prices.”

The hydroponic unit can also run on solar energy. Credit: Jewel Fraser/IPS

The hydroponic unit can also run on solar energy. Credit: Jewel Fraser/IPS

Hydroponics, a method of growing plants without soil using mineral nutrients in water, is increasingly considered a viable means to ensure food security in light of climate change.

His project is one of several being considered for further development by the Caribbean Climate Innovation Centre (CCIC), headquartered in Jamaica.

The newly launched CCIC, which is funded mainly by the World Bank and the government of Canada, seeks to  fund innovative projects that will “change the way we live, work and build to suit a changing climate,” said Everton Hanson, the CCIC’s CEO.

A first step to developing such projects is through Proof of Concept (POC) funding, which makes available grants from 25,000 to 50,000 dollars to successful applicants to “help the entrepreneur to finance those costs that are related to proving that the idea can work,” said Hanson.

Among the items that POC funding will cover are prototype development such as design, testing, and field trials; market testing; raw materials and consumables necessary to achieve proof of concept; and costs related to applications for intellectual property rights in the Caribbean.

A POC competition is now open that will run until the end of March. “After that date the applications will be evaluated. We are looking for ideas that can be commercialised and the plan is to select the best ideas,” Hanson said.

The CCIC, which is jointly managed by the Scientific Research Council in Jamaica and the Caribbean Industrial Research Institute in Trinidad and Tobago, is seeking projects that focus on water management, resource use efficiency, energy efficiency, solar energy, and sustainable agribusiness.

Bhagwandeen entered the POC competition in hopes of securing a grant, because “this POC funding would help in terms of market testing,” he explained.

The 48-year-old engineer says he wishes to build dozens of model units and “distribute them in various areas, then monitor the operations and take feedback from users.” He said he would be testing for usability and reliability, as well as looking for feedback on just how much light is needed and the best locations in a house or building for situating his model.

“I would then take the feedback, and any issues that come up I can refine before going into mass marketing,” he said.

Bhagwandeen’s model would enable homeowners to grow leafy vegetables, including herbs, lettuce and tomatoes, inside their home or apartment, with minimal expense and time.

The model uses smart electronics, meaning that 100 units can run on the same energy as a 60-watt light bulb, he said. So it differs from typical hydroponics systems that consume a great deal of energy, he added. His model can also run on the energy provided by its own small solar panel and can work both indoors and outdoors.

Bhagawandeen said his model’s design is premised on the fact that “our future as a people is based more and more on city living and in order for that to be sustainable, we need to have city farming at a family level.”

A U.N. report says that “the population living in urban areas is projected to gain 2.6 billion, passing from 3.6 billion in 2011 to 6.3 billion in 2050.” Most of that urban growth will be concentrated in the cities and towns of the world’s less developed regions.

To meet the challenges of climate change adaptation, the CCIC “will support Caribbean entrepreneurs involved in developing locally appropriate solutions to climate change.”

Bhagwandeen said that support from organisations like the CCIC is critical for climate change entrepreneurs. “From the Caribbean perspective, especially Trinidad and Tobago, we are a heavily consumer-focused society. One of the negatives of Trinidad’s oil wealth is that we are not accustomed to developing technology for ourselves. We buy it.

“We are a society of traders and distributors and there is very little support for innovators and entrepreneurs.”

He said access to markets and investors poses a serious challenge for regional innovators like himself, who typically have to rely on bootstrapping to get their business off the ground.

Typically, he said, regional innovators have to make small quantities of an item, sell those items, and then use the funds to make incrementally larger quantities. “So that if you get an order for 500 units, you cannot fulfill that order,” he said.

Fourteen Caribbean states are involved in CCIC: Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago.

The Caribbean CCIC is one of eight being developed across the world.

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G20 Urges U.S. Action on IMF Reforms by April http://www.ipsnews.net/2014/02/g20-urges-u-s-action-imf-reforms-april/?utm_source=rss&utm_medium=rss&utm_campaign=g20-urges-u-s-action-imf-reforms-april http://www.ipsnews.net/2014/02/g20-urges-u-s-action-imf-reforms-april/#comments Tue, 25 Feb 2014 00:58:50 +0000 Carey L. Biron http://www.ipsnews.net/?p=132005 The Group of 20 (G20) industrialised and emerging economies on Sunday formally expressed frustration with the ongoing inability of the United States to approve a major reform package that would see governance at the International Monetary Fund (IMF) shift more towards developing countries. The reforms were approved by the IMF in 2010 and have since […]

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By Carey L. Biron
WASHINGTON, Feb 25 2014 (IPS)

The Group of 20 (G20) industrialised and emerging economies on Sunday formally expressed frustration with the ongoing inability of the United States to approve a major reform package that would see governance at the International Monetary Fund (IMF) shift more towards developing countries.

The reforms were approved by the IMF in 2010 and have since been ratified by more than three-quarters of the fund’s member governments. Yet while the administration of President Barack Obama has been a key proponent of the reforms, the U.S. Congress has thus far been unwilling to approve the changes."The BRICS are wondering why they put up their money when nothing is happening." -- Jo Marie Griesgraber

Because the United States, with around 17 percent of voting rights (or “quota” shares) has an effective veto within the IMF, the reforms cannot go forward without the U.S. vote. The process has now missed a January deadline, while a second deadline for a subsequent round of changes is looming.

“Given that the U.S. is a big part of the G20, it is no small victory that emerging market and developing countries were able to get IMF reform so formally prioritised,” Kevin P. Gallagher, co-director of the Global Economic Governance Initiative at Boston University, told IPS. “Such pressure is basically the US administration and the rest of the world against the U.S. Congress.”

On Sunday, the G20, which has been a key organiser of the international financial response in recent years, strongly criticised the deadlocked reforms process. It also offered a new deadline for U.S. action.

“We deeply regret that the IMF quota and governance reforms agreed to in 2010 have not yet become effective,” the G20 stated in a communiqué on Sunday, following a ministerial meeting in Australia, which is hosting the grouping this year.

IMF chief Christine Lagarde. The quota changes would significantly increase the currently underweighted influence of fast-rising economies such as Brazil, China, India and Turkey. Credit: World Economic Forum/cc by 2.0

IMF chief Christine Lagarde. The quota changes would significantly increase the currently underweighted influence of fast-rising economies such as Brazil, China, India and Turkey. Credit: World Economic Forum/cc by 2.0

“Our highest priority remains ratifying the 2010 reforms, and we urge the US to do so before our next meeting in April. In April, we will take stock of progress towards meeting this priority.”

IMF Managing Director Christine Lagarde echoed this concern, saying Sunday that the fund “share[s] this view and urge[s] rapid progress on implementation.” The Washington-based institution is considered the world’s “lender of last resort”.

The quota changes would significantly increase the currently underweighted influence of fast-rising economies such as Brazil, China, India and Turkey. It would do so largely by decreasing the cumulative share of European members, considered outsized in terms of gross domestic product.

The Netherlands and Spain, for instance, both have voting shares similar in size to Brazil’s, despite the fact that the Spanish economy is less than two-thirds the size of the Brazilian. Given the problems in the eurozone, the European countries have also been prime beneficiaries of IMF support in recent years.

Under the quota reforms, the so-called BRICS countries – middle-income countries including Brazil, India and China – would see their vote shares expand the most significantly. The 2010 reforms would shift around nine percent of these shares towards developing countries, while also doubling the size of the fund’s overall lending capacity.

“The Europeans love it – they’re gloating. They have excessive power, are significantly overrepresented, and they love that [the United States] is not moving the reforms process forward,” Jo Marie Griesgraber, the executive director of the New Rules for Global Finance Coalition, a Washington-based international network, told IPS.

“On the other hand, the BRICS are wondering why they put up their money when nothing is happening. They’re most unhappy. In the long term, the BRICS countries could say this doesn’t work for them and move more seriously away from the IMF.”

On Sunday, a top Indian finance official warned that the failure to move forward on quota reform was threatening to undermine both IMF and G20 legitimacy.

“This is perhaps the first visible failure of G20. This has reduced the credibility of G20,” India’s economic affairs secretary, Arvind Mayaram, said in Sydney, calling implementation of the 2010 reforms “vital for the credibility, legitimacy and effectiveness of the IMF”.

Alternative institutions

Although an esoteric topic, the IMF governance reforms have received widespread approval from important constituencies in the United States, including major business and financial lobby groups as well as a long list of Republican luminaries.

In fact, President Obama bears some blame for the current situation, having decided in 2012 for political reasons not to request approval from the U.S. Congress. Yet since then, his administration has tried to do so repeatedly.

Each time, however, the Republican-controlled House of Representatives has rebuffed these requests, though apparently less for ideological than for political reasons. The last such attempt took place last month, when Republicans agreed to include the IMF reforms proposal in a major appropriations bill – but only if the Democrats would agree to stop the U.S. Treasury from imposing proposed restrictions on political “dark money”.

President Obama reportedly refused the trade, and there are few legislative options left for moving related legislation through Congress in coming months, particularly as national elections loom at the end of the year. (On Sunday, U.S. Treasury Secretary Jacob Lew told the G20 his office “will continue to work with Congress to pass legislation as soon as possible to secure the 2010 reforms, which are vital to our economic and national security interests.”)

Some observers say that such a situation should only strengthen an ongoing process under which developing countries are building multilateral structures outside the IMF.

“Upcoming Congressional elections may lead to further entrenchment by the U.S. on this issue. Thus it is imperative that the developing world continue to build alternative institutions such as the BRICS bank and the BRICS exchange reserve pool,” BostonUniversity’s Gallagher says.

“Just as important is for these bodies to have more equitable and transparent processes, so they can be held up as models against the arcane structures in the international financial institutions.”

The BRICS countries announced their intention to create a new multilateral development bank last year. Yet since then, progress has reportedly been slow, particularly as ongoing economic roiling is being felt particularly strongly in emerging economies.

“There is good talk about these projects, but most countries remain very reluctant to walk away from the [IMF]. Nonetheless, we are already seeing a gradual erosion in the use of the institution,” New Rules’s Griesgraber says.

“From our perspective, we need to get through this current reform process so we can move on to the larger governance issues that need to be addressed at the fund. Let’s equalise the power, introduce greater transparency around the board, and ensure that likely consequences for poor people are assessed before the IMF acts.”

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DRC Mega-Dam to Be Funded by Private Sector, Groups Charge http://www.ipsnews.net/2014/02/drc-mega-dam-funded-private-sector-groups-charge/?utm_source=rss&utm_medium=rss&utm_campaign=drc-mega-dam-funded-private-sector-groups-charge http://www.ipsnews.net/2014/02/drc-mega-dam-funded-private-sector-groups-charge/#comments Tue, 11 Feb 2014 01:58:55 +0000 Carey L. Biron http://www.ipsnews.net/?p=131424 Watchdog groups here are warning that a deal has been struck that would see Chinese investors fund a massive, contentious dam on the Congo River, the first phase of a project that could eventually be the largest hydroelectric project in the world. Discussions around the Inga III dam proposal, in the Democratic Republic of Congo […]

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The Inga III dam would be the first in a series of hydroelectric installations along the Congo River, collectively referred to as the Grand Inga project. Credit: alaindg/GNU license

The Inga III dam would be the first in a series of hydroelectric installations along the Congo River, collectively referred to as the Grand Inga project. Credit: alaindg/GNU license

By Carey L. Biron
WASHINGTON, Feb 11 2014 (IPS)

Watchdog groups here are warning that a deal has been struck that would see Chinese investors fund a massive, contentious dam on the Congo River, the first phase of a project that could eventually be the largest hydroelectric project in the world.

Discussions around the Inga III dam proposal, in the Democratic Republic of Congo (DRC), have been taking place in some form for decades. They have picked up speed over the past year, however, under the auspices of the World Bank, the Washington-based development funder.“Handing the project over to a private investor will make it even less likely the country’s poor people would benefit from the project.” -- Peter Bosshard

On Tuesday, the bank’s board of directors were to have voted on an initial 73-million-dollar loan for the project, to be offered through the International Development Association (IDA), the institution’s programme for the world’s poorest countries. Last week, however, that vote was abruptly postponed.

Now, civil society groups are reporting that the project may be going forward instead under the World Bank’s private-sector arm, the International Finance Corporation (IFC), with the backing of Chinese investors. Yet critics, who have long worried about the local social and environmental impact of the Inga project, worry that greater involvement by the private sector will result in skewed prioritisation of beneficiaries.

“Handing the project over to a private investor will make it even less likely the country’s poor people would benefit from the project,” Peter Bosshard, policy director for International Rivers, an advocacy group, said Monday.

“The IFC deal was arranged behind closed doors without any accountability to the DRC parliament, the World Bank’s board of directors, or civil society … Non-transparent deals such as the Inga 3 Dam are the best recipe for deepening corruption in the DRC. They will not strengthen the public accountability that is necessary for social and economic development.”

Citing multiple sources within the bank, Bosshard says the decision to change the Inga III funding modality appears to have been made between high-level officials from the World Bank, the IFC and USAID, the U.S. government’s main foreign-aid arm, reportedly bypassing the bank’s board of directors. Thus far, none of these institutions have publicly confirmed any deal.

“The World Bank Group is fully committed to supporting the Inga III hydropower project, which has the potential to improve the lives of millions of Africans,” a bank spokesperson told IPS in a statement. “We postponed presenting to our Board a Technical Assistance package related to the design of the project’s operation, but the project has not been cancelled, and our commitment to Inga III is unchanged.”

Primary beneficiaries

As currently envisioned, the Inga III dam would be the first in a series of hydroelectric installations along the Congo River, collectively referred to as the Grand Inga project. This would include a single 145 metre dam, which would flood an area known as the Bundi Valley, home to around 30,000 people.

The full project could provide up to 40,000 megawatts of electricity, a power potential that has been eyed hungrily by the rest of the continent for decades. While DRC’s chaotic governance has stymied forward progress on the project for years, the Grand Inga vision received an important boost last year when the South African government agreed to purchase a substantial amount of power produced by Inga III.

The 12-billion-dollar dam is now supposed to be built by 2020 and, according to Congolese government estimates from November, would produce around 4,800 MW of electricity. Of this, 2,500 MW would go to South Africa while another 1,300 MW would be earmarked for use by mines and related industry in the province of Katanga.

“There is little indication that the dam development schemes underway would address the issue of access to electricity for the population at-large; industrial users stand to be the primary beneficiaries,” Maurice Carney, executive director of Friends of the Congo, an advocacy group here, told IPS.

“Only 10 percent of Congo’s population has access to electricity and the situation is even worse for rural population, where only 1 percent has access to electricity. For a country like the DRC that is endowed with a plethora of alternative energy options, smaller-scale renewable energy technologies would be the best way forward.”

Carney and others are calling for a cumulative assessment of the Grand Inga scheme, to include study of all social and environmental impacts. Indeed, these have been longstanding concerns, but now some development advocates worry that greater private sector involvement in the Inga III project will further exacerbate such issues.

“We have questions about whether the scheme can deliver any development at all in the hands of the private sector,” Joshua Klemm, manager of the Africa programme at the Bank Information Center, a watchdog group here that focuses on the World Bank, told IPS.

“For good or bad, if this project belongs to the Congolese government, there’s at least some hope to expand electricity access in the country. That would go out the window if we’re talking about a purely private sector project.”

Duelling U.S. stances

As the Inga III project picked up momentum in recent months, USAID too expressed its interest in the proposal. The agency’s administrator, Rajiv Shah, visited the Inga III dam site in mid-December, and stated that the proposal could be added to a new, large-scale initiative by the United States to significantly increase electrification across Africa.

Although USAID was unable to comment for this story by deadline, any involvement by the agency in brokering a deal with the IFC would be interesting. Just last month, the U.S. Congress passed a landmark new law requiring the U.S. Treasury to formally vote against multilateral funding for large-scale hydroelectric projects in developing countries.

The new provisions, contained in a huge appropriations bill funding the federal government, impact both on bilateral U.S. funding through agencies such as USAID, as well as on the significant contributions that the United States provides to multilateral development institutions, particularly the World Bank. (The U.S. Treasury was unable to comment by deadline.)

“Under the [appropriations] language, the United States will have to oppose the Inga III dam at the IFC as much as it would have had to do this if it were an IDA project,” International Rivers’ Bosshard told IPS. “There’s no difference there, but it is ironic that the USAID administrator would have pushed the deal.”

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World Bank Arm Admits Wrongs in Honduras Loan http://www.ipsnews.net/2014/01/world-bank-arm-admits-wrongs-honduras-loan/?utm_source=rss&utm_medium=rss&utm_campaign=world-bank-arm-admits-wrongs-honduras-loan http://www.ipsnews.net/2014/01/world-bank-arm-admits-wrongs-honduras-loan/#comments Fri, 24 Jan 2014 01:18:03 +0000 Jim Lobe http://www.ipsnews.net/?p=130694 In an unusual statement, the World Bank’s private-sector arm has threatened to cancel a controversial investment in a Honduran palm oil company that has been implicated in serious human rights abuses, including numerous killings, over the past five years. The statement came two weeks after the release of a damning report by the Office of […]

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By Jim Lobe
WASHINGTON, Jan 24 2014 (IPS)

In an unusual statement, the World Bank’s private-sector arm has threatened to cancel a controversial investment in a Honduran palm oil company that has been implicated in serious human rights abuses, including numerous killings, over the past five years.

A member of the Aguan Valley Palm Producers Association holds the fruit from which palm oil is extracted. Credit: USDA/cc by 2.0

A member of the Aguan Valley Palm Producers Association holds the fruit from which palm oil is extracted. Credit: USDA/cc by 2.0

The statement came two weeks after the release of a damning report by the Office of the Compliance Advisor/Ombudsman (CAO) of the International Finance Corporation (IFC) that concluded, among other things, that Bank officials should have raised serious questions about the alleged complicity in those abuses by Corporacion Dinant before approving a 30- million-dollar loan to the company in 2008.

The company, which is owned by Miguel Facusse Barjum, “the wealthiest, most powerful businessman in the country,” according to a State Department cable obtained by Wikileaks, is based in the lower AguanValley, a region populated by hundreds of campesino cooperatives established there as a result of a far-reaching land-reform programme initiated in the 1960s.

Conflicts over Dinant’s efforts to buy up these communities’ lands under a 1992 law designed to favour the country’s burgeoning privately-owned agro-export industry, account for many of the abuses.

Since the 2009 military coup, which ousted a pro-reform president and which was reportedly backed by Facusse, nearly 100 people – mostly campesinos, as well as some Dinant employees – have been killed in the valley, according to press reports, although Rights Action, a Washington-based group that has closely monitored the conflict, estimates the campesino death toll at “well over one hundred.”

“IFC has not disbursed funds to Dinant since 2009, and will not disburse further funding until Dinant fulfills its commitments in the Action Plan (worked out between the IFC and Dinant in light of the ombudsman’s report), including strengthening its community engagement and environmental and social standards, and reviewing its security practices,” the IFC said.

“Should Dinant fail to meet these commitments, IFC stands prepared to exercise all remedies available, including cancelling the loan,” according to the statement, which also promised to “refine” its action plan to take account of recent criticism by international and Honduran civil-society organisations (CSOs) and “reflect on” internal problems that led to mistakes.

While many CSOs welcomed the IFC’s latest statement, comparing it favourably to the agency’s initial, more ambiguous reaction to the CAO report, they said it still fell short of what is required to redress the situation.

“The only real difference from its previous statement is that they explicitly said the possibility of cutting off the loan remains open if the action plan is not complied with,” Annie Bird, who directs Rights Action, told IPS.

“The action plan that the IFC is proposing is completely inadequate. People are going into hiding, afraid of being killed, and entire communities remain in constant fear of being evicted from their land. And the IFC really isn’t doing anything to do about it. It’s just calling on the Dinant Corp to work with the government.”

Her disappointment was echoed by Berta Caceres, co-ordinator of the Honduras-based Indigenous Lenca organisation (COPINH). “There is a risk that the situation of violence and impunity which exists in the Bajo Aguan will repeat itself in the future, if the World Bank does not investigate this company’s activities nor consult indigenous communities, farmers, and Garifunas,” she said.

The original 30-million-dollar loan – part of a 100 million dollar package that included Germany’s development bank, the Inter-American Development Bank (IDB), and the Central American Bank for Economic Integration — was signed in April 2009 to fund expansion of Dinant’s snacks and edible-oils processing facilities.

In November 2009 – four months after the military coup that ousted elected President Manuel Zelaya – the IFC disbursed 15 million dollars in support of the project.

One year later, a coalition of CSOs asked the CAO to audit the project and its implementation in light of the human-rights situation in the valley.

The German development bank cancelled its 20 million dollar loan in 2011 after one rights group, Food First Information and Action Network (FIAN), submitted “evidence of the involvement of private security forces hired by Dinant and other companies owned by Miguel Facusse in human rights abuses and, in particular, in the murder of peasants in Bajo Aguan.”

In its 72-page report, the CAO concluded that IFC staff had violated the agency’s own rules by failing to undertake due diligence in assessing and responding to risks of violence and forced evictions and to consult adequately with the agency’s environmental and social specialists on the project.

These deficiencies, it found, were in part due to its culture and incentive system that effectively encouraged staff to “overlook, fail to articulate, or even conceal potential environmental, social, and conflict related risks.”

“IFC has important policies to protect human rights and the environment,” noted Jessica Evans, senior international financial institutions researcher at Human Rights Watch (HRW). “But the Dinant case shows that staff treat them as optional. That needs to avoid more tragic outcomes.”

In response, the IFC took issue with some findings but agreed with others and set forth an “Action Plan” which was immediately denounced by most of the CSOs, including HRW, as inadequate. Their reaction, as well as negative international media coverage, reportedly triggered the Bank board’s demand that the agency revise its plan – details of which have not been disclosed — and issue a new statement.

The statement differs mainly from the IFC’s initial reaction in the apologetic tone it assumes, stressing, for example, that it “acknowledges that there were shortcomings in how we implemented our environmental and social policies and procedures…

“As noted in the audit, IFC must take a broad view of the country and sector risks when considering projects. Additionally, we need to pay more attention to a client’s security practices and preparedness in fragile country situations,” it said.

But its contrite tone failed to appease the CSOs or some Honduras experts.

The IFC’s reliance on the Honduran government in resolving the land conflicts and addressing the human-rights situation made little sense, according to Dana Frank, a Honduras specialist at the University of California at Santa Cruz.

“There’s a reason why the national government is not intervening in the Aguan valley to stop these killings of campesinos and why there’s complete impunity for the security forces and private security guards who have been killing them,” she told IPS. “It’s because Facusse is a formidable power in the national state.”

Indeed, the Facusse family, of which he, at age 90, is considered the partriarch, is widely seen as the most important and influential in what is essentially an oligarchic system.

Rights Action’s Bird also complained about the inadequacy of the response, insisting that the IFC should not only cancel the loan but also work with the affected communities to redress the abuses they have suffered.

She also complained that the IDB, whose own private-sector facility, the Inter-American Investment Corporation (IIC), had participated in the loans to Dinant, has never audited its own performance. “Instead, the IDB is initiating a 60 million dollar loan to create a police intelligence unit that human rights organisations in Honduras are screaming about because the security forces there are out of control,” she said.

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Europe’s Leaders Visit Athens to Celebrate Their Failure http://www.ipsnews.net/2014/01/europes-leaders-visit-athens-celebrate-failure/?utm_source=rss&utm_medium=rss&utm_campaign=europes-leaders-visit-athens-celebrate-failure http://www.ipsnews.net/2014/01/europes-leaders-visit-athens-celebrate-failure/#comments Wed, 08 Jan 2014 15:20:34 +0000 Apostolis Fotiadis http://www.ipsnews.net/?p=129963 The start of Greece’s six-month presidency of the EU was marked by a ceremony Wednesday in the Greek capital attended by the EU commissioners. But protests were banned and there was no in-depth talk about the raging controversy over the bloc’s handling of the Greek debt crisis and the renewed concerns about the vitality of […]

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Greek PM Antonis Samaras greets European Commission President José Manuel Barroso in Athens for the ceremony marking Greece's assumption of the rotating EU presidency. Credit: Apostolis Fotiadis/IPS

Greek PM Antonis Samaras greets European Commission President José Manuel Barroso in Athens for the ceremony marking Greece's assumption of the rotating EU presidency. Credit: Apostolis Fotiadis/IPS

By Apostolis Fotiadis
ATHENS, Jan 8 2014 (IPS)

The start of Greece’s six-month presidency of the EU was marked by a ceremony Wednesday in the Greek capital attended by the EU commissioners. But protests were banned and there was no in-depth talk about the raging controversy over the bloc’s handling of the Greek debt crisis and the renewed concerns about the vitality of the Eurozone.

In May 2010, the Eurozone countries and the International Monetary Fund (IMF) agreed on a 110 billion euro bailout for Greece, conditional on compliance with severe fiscal consolidation, privatisations and economic reforms to bolster competitiveness. A second bailout of 130 billion euro with a debt restructure followed in February 2012, with additional austerity measures.

The recipe soon mutated into a scorched earth policy. Greece entered its seventh year of recession in 2014, with unemployment hitting a historical high of 28 percent and youth unemployment surpassing 65 percent – up from seven percent when the austerity measures began to be implemented.

In June 2013, the IMF – part of the so-called troika of international creditors overseeing implementation of the austerity policies in Greece, along with the European Commission and European Central Bank – admitted mistakes in handling the Greek debt crisis.

Deregulation of the labour market, severe taxation of the labour force and reforms of the health sector have cut so deeply through the social fabric that many are wondering whether austerity has caused a humanitarian crisis in Greece.

In 2012, nearly one million of the country’s 11.3 million people were living below the poverty line, according to the Greek Finance Ministry. Among them, more than 65,000 were surviving on less than three euros (four dollars) a day, while 102,000 people earned incomes ranging between 1,000 euros (1,358 dollars) and 2,000 euros (2,716 dollars) a year.

According to Greece’s statistics agency, by late 2012, austerity measures had shrunk the labour market by 20.8 percent – 870,000 jobs were lost since 2009 – and had taken more than 40 percent of the labour force out of the national insurance system.

Lee Buchheit, a globally acknowledged legal expert involved in the debt restructure accompanying the second bailout for Greece, told IPS that the Eurozone debt crisis is not over yet.

“It is worth remembering that with the single exception of Greek PSI [private sector involvement], not a single euro of the debt of the afflicted countries [Ireland, Portugal, Spain and Greece] has been written off. Each of those countries will be emerging from their bailout programmes carrying debt loads far heavier than when they entered the programmes.”

What has changed, Buchheit says, is the identity of the lenders. “The original private sector bondholders have been paid back in full and on time through new borrowings from official sector sources [the EU and IMF]. So the taxpayers of the debtor countries remain entirely on the hook for the repayment of those debts; they will just be paying them to a different set of creditors.”

Changing the identity of the creditor does not solve the debt problem, he said. “A sustainable solution would require either a reduction in the size of the debt loads or significant growth in the economy of the debtor countries, or both. Unfortunately, neither of those things has yet happened in the Eurozone periphery.”

But instead of considering a change of course to stimulus economics, European – most notably German – leaders are refusing to accept the failure of austerity. On the contrary, they have speculated that any extra help for Greece will come in the form of another bailout package.

Economist Philippe Legrain resigned last month from the Bureau of European Policy Advisers, an advisory body to the president of the European Commission. A week after his resignation he delivered a speech in Athens blaming European leaders for postponing an inevitable default at great social cost.

“I think Greece cannot pay back its debts in full. So the questions are not whether Greece’s debts will be written down, but when and how,” he told IPS in an email interview. “As of now, I think it will happen little by little and that it will take the form of lower interest rates and longer repayment terms rather than writing down the principal of the debt, to preserve the fiction that the debt is being repaid in full.”

Despite increasing concerns about society imploding, the Greek government insists on its optimistic scenario that foresees a return of the country to positive growth rates in 2014. The Finance Ministry has repeatedly reassured that Greece will mark a 0.6 percent primary surplus and will successfully return to the credit markets by the end of 2014.

Its optimism has been met with disbelief. The Organisation for Economic Cooperation and Development’s (OECD) forecast of a 0.4 percent contraction contrasts with the Greek government’s projection of 0.6 percent growth this year. The European Commission has predicted a Greek return to the markets in 2015.

In a scathing editorial this week, Germany’s Der Spiegel magazine described Greek Prime Minister Antonis Samaras as “out of touch with reality.”

Meanwhile, Samaras’ coalition government, expected to face a huge protest vote in the European elections next May, has no alternative but to carry on with a painful reform of Greece’s primary care sector, suspending 1,000 doctors and 8,000 administrative jobs, many of which will eventually be lost. This will make up the bulk of the 15,000 jobs the Greek government has to suspend in 2014, under its austerity obligations.

The reform will transform the biggest insurance fund in the country from a service provider to a purchaser in the private health market, with many accusing the government that the real aim is not the creation of a more effective system but the indirect privatisation of primary care which will exclude hundreds of thousands from any kind of medical coverage.

“Austerity politics are a mistake,” says cardiologist George Vichas, the spirit behind a major parallel grassroots health structure, the Metropolitan Community Clinic at Helliniko, that has treated 20,000 uninsured people in its 23 months of existence.

“But those who implemented them have not made a mistake. These results are exactly what they aimed at and what they believe in. They have experimented on Greece the last four years, but now the first signs of health sector deregulation have started appearing in Britain, France and Italy. This is Europe’s future.”

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In the Philippines, a Vortex of Climate Change and Debt http://www.ipsnews.net/2013/12/philippines-vortex-climate-change-debt/?utm_source=rss&utm_medium=rss&utm_campaign=philippines-vortex-climate-change-debt http://www.ipsnews.net/2013/12/philippines-vortex-climate-change-debt/#comments Mon, 23 Dec 2013 18:34:42 +0000 Samuel Oakford http://www.ipsnews.net/?p=129708 Since Typhoon Yolanda made landfall in the Philippines on Nov. 8, the country has sent holders of its debt close to one billion dollars, surpassing, in less than two months, the 800 million dollars the U.N. has asked of international donors to help rebuild the ravaged central region of the archipelago. Even as the Philippines […]

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Children affected by Typhoon Haiyan (local name Yolanda) wait for their turn to receive aid in Tacloban, Leyte, Philippines. Credit: UNICEF

Children affected by Typhoon Haiyan (local name Yolanda) wait for their turn to receive aid in Tacloban, Leyte, Philippines. Credit: UNICEF

By Samuel Oakford
UNITED NATIONS, Dec 23 2013 (IPS)

Since Typhoon Yolanda made landfall in the Philippines on Nov. 8, the country has sent holders of its debt close to one billion dollars, surpassing, in less than two months, the 800 million dollars the U.N. has asked of international donors to help rebuild the ravaged central region of the archipelago.

Even as the Philippines goes hat in hand to wealthier countries seeking disaster relief, it continues to diligently pay creditors in those same countries millions of dollars every day – much of it interest on debt that can be traced back to the corrupt regime of Ferdinand Marcos (1965-1986) , Cold War ally to the West.“We think it is always a bad idea and unjust to respond to a disaster by lending money." -- Tim Jones of Jubilee

When Philippine President Benigno Aquino III announced last week the staggering cost of rebuilding from the storm, the price tag – 8.17 billion dollars – and a pair of emergency loans to help meet that goal distressed debt reduction campaigners in the country who have for many years called for a cancellation of illegal debts.

“Every dollar of funding assistance will be used in as efficient and as lasting a manner as possible,” Aquino assured reporters. “The task immediately before us lies in ensuring that the communities that rise again do so stronger, better and more resilient than before.”

Yet every 12 months, the Philippines transfers to lenders nearly the same amount Aquino hopes to raise for reconstruction. And because Filipino law privileges the payment of debt over all other expenses, those installments could end up eating into rebuilding funds.

Even before the storm, education and healthcare spending in the country fell well short of global benchmarks; one in five Filipinos live in poverty and over 15 million are malnourished.

As the storm’s damage became clear, Aquino rushed to the World Bank and Asian Development Bank (ADB), both of which quickly inked 500-million-dollar emergency reconstruction loans and several small cash grants of less than 25 million dollars.

“From now until December 2014 we will be preoccupied with critical immediate investments such as the rebuilding and repair of infrastructure and the construction of temporary houses,” said President Aquino.

But the Philippines suffers on average seven to eight typhoons annually and climate change models predict storms like Yolanda will become more commonplace in the future.

Warsaw Mechanism Comes Too Late

Yolanda was the strongest storm ever to make landfall, lashing the central coastline with sustained winds of 195 mph and storm surges of several feet. More than 8,000 were killed or left missing and four million were displaced. Before-and-after images of Tacloban show on the left a burgeoning city, but on the right an indecipherable mass of rubble, as if a hydrogen bomb has gone off.

Reyes says it would be bad enough if the wealthy countries that the Philippines owes for deals like the Bataan nuclear plant were weren’t also the ones responsible for the vast portion of climate change gases released over the past 150 years.

At the UN Climate Change Conference in Warsaw that began just days after the storm hit, Yeb Sano, leader of the Filipino delegation, went on a hunger strike, holding out for substantial promises for a system of payment from those who instigate climate change to those who suffer from it.

Eventually the outlines of such a scheme was agreed up, but the “Warsaw Mechanism,” will require further definition and, vitally, the cooperation of countries that would stand to pay into any reparations regime.

A similar void exists where an international mechanism could allow countries to examine debt or declare bankruptcy, much as companies and municipalities already can.

It is in this space bereft of clues that the Philippines attempts to rebuild.

“Debts that should have been cancelled years ago are limiting the country’s capacity to respond and prepare for future emergencies,” says Jones. “Action on this is clearly needed before any new debts are added.”

Emergency loans set a troubling precedent, especially in a country where 20 percent of government revenue already goes to debt servicing, says Tim Jones, senior policy and campaigns officer at the Jubilee Debt Campaign.

“We think it is always a bad idea and unjust to respond to a disaster by lending money,” Jones told IPS.

The U.N. Framework Convention on Climate Change prohibits climate-related investments from increasing the debt of a country. But the statute is ignored in emergency situations.

If the tomorrow predicted by climatologists is already here, ask activists, what can be considered “critical immediate investments?”

As financial and climatic “crisis” insinuates itself into the everyday, temporary measures that further indebt nations can easily morph into long-term palliative care for the world’s most vulnerable countries.

“The logic of the loan, if there is any, is that the money is lent so the money can be repaid, and by definition that cannot happen in the context of a reconstruction loan,” said Jones. “What sticks in the throat even more is when the World Bank and ADB present these amounts as aid.”

Though the Philippines has made progress in reducing its debt burden over the past decade – in large part due to one-time payments from wide-scale privatisations – the country may find itself in a similar state of climate-induced paralysis as soon as the next typhoon season.

Marcos’ legacy

President Marcos, who is said to have stolen as much as 10 billion dollars during his 21-year rule, borrowed 5.5 billion from the IMF and World Bank and a further 3.5 billion through bilateral deals with foreign governments.

Among the many fraudulent agreements Marcos was able to skim from were a set of U.S. loans earmarked for a Westinghouse-built Nuclear Power Plant on the Baatan peninsula. The structure, which was eventually built along a seismic fault line and next to a volcano and would cost the Philippines 2.3 billion dollars, never produced a single watt of electricity – though it did help finance Marcos’ wife Imelda’s infamous collection of over 3,000 pairs of shoes.

In 2008, the Philippine Congress suspended payments on 11 “illegitimate loans,” only to be reversed by then president Arroyo, under pressure from the IMF and fearful of interest rate repercussions.

Again, in 2011, Congress attempted a debt audit, but the committee chairman was quickly dismissed by President Aquino.

“They don’t want a precedent to be set,” said Jones.

Multilateral lenders, larger and more easily tracked than private bondholders, fear a forensic analysis of the debt could unearth billions in illegitimate loans, opening the floodgates for cancellation. Governments, for their part, fear that unilateral targeted defaults would be punished severely by investors.

Both the World Bank and ADB have been financially supportive – through both grants and loans – of innovative cash transfer schemes and climate change mitigation programmes in the Philippines. But neither would comment on questions of climate reparations or of a debt audit in any form.

Rogier Van Den Brink, the World Bank’s lead economist in the Philippines, told IPS the country’s immediate needs were paramount.

“It is critical that reconstruction begins quickly to minimise the economic impact and more importantly to reduce the hardship for people, especially the poor and vulnerable,” said Van Den Brink.

Though the loans offer grace periods of between eight and 10 years and yields barely above interbank rates, they are nonetheless debt, says Ricardo Reyes, president of the Freedom from Debt Coalition.

“Filipinos are being asked to pay without any consultation,” Reyes told IPS.

Reyes is one of many activists who, following Marcos’ overthrow in 1986, turned their attention to what they saw as his lasting legacy – a severe debt overhang made possible by complicit Western governments.

“The conversation of those in government after Marcos has been the same: ‘rely on foreign loans’ was always a mantra for them,” said Reyes. “I think taking these loans is a fatal mistake.”

Asked to what extent the Philippines’ debt could be tied to corruption, a spokesperson for Finance Secretary Cesar Purisima told IPS, “It is difficult to make a guess, your guess is as good as mine.”

But efforts to do more than guess have been successful elsewhere.

In 2008, Ecuador carried out an extensive audit of its foreign debt and decided to default on 3.2 billion dollars of loans. That decision, at the height of the financial crisis, was timed propitiously and the country recently announced plans to return to the international bond market in 2014.

“Economically and morally it is outrageous for the Philippines to be paying so much out of country in debt payments when it’s been hit by this disaster that’s been influenced by carbon dioxide emissions from the richest countries in the world,” said Jones.

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World Bank Raises 52b Dollars for Poorest Countries http://www.ipsnews.net/2013/12/world-bank-raises-52b-dollars-poorest-countries/?utm_source=rss&utm_medium=rss&utm_campaign=world-bank-raises-52b-dollars-poorest-countries http://www.ipsnews.net/2013/12/world-bank-raises-52b-dollars-poorest-countries/#comments Wed, 18 Dec 2013 19:13:15 +0000 Carey L. Biron http://www.ipsnews.net/?p=129627 The World Bank has raised some 52 billion dollars, a record amount, for its fund for development in the world’s poorest countries, though some are expressing concerns over the terms under which some of this money is being offered by donor governments. The bank made the announcement Tuesday in Moscow, where donors wrapped up a […]

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A woman sits in front of a camp after receiving oil and wheat from a U.N. distribution centre in Peshawar. Sixty percent of Pakistan’s population lives below the poverty line. Credit: Ashfaq Yusufzai/IPS

A woman sits in front of a camp after receiving oil and wheat from a U.N. distribution centre in Peshawar. Sixty percent of Pakistan’s population lives below the poverty line. Credit: Ashfaq Yusufzai/IPS

By Carey L. Biron
WASHINGTON, Dec 18 2013 (IPS)

The World Bank has raised some 52 billion dollars, a record amount, for its fund for development in the world’s poorest countries, though some are expressing concerns over the terms under which some of this money is being offered by donor governments.

The bank made the announcement Tuesday in Moscow, where donors wrapped up a two-day pledging summit to top up funding for the International Development Association (IDA), the arm of the Washington-based development institution that focuses on boosting development among the poorest of the poor in 82 countries.“Global cuts to aid are costing lives, so the news that donors have made generous contributions to this fund for the world’s poorest is very welcome news." -- Nicolas Mombrial of Oxfam

World Bank Group President Jim Yong Kim called the effort a “success for the global community”, with the amount constituting around the midpoint of what bank officials had hoped to raise.

“The World Bank continues to show that it is very good at fundraising for IDA,” Scott Morris, a former U.S. Treasury official coordinating U.S. engagement with the World Bank and currently a visiting fellow at the Centre for Global Development, a think tank here, told IPS.

“The dollar amount is a big one and represents a strikingly positive outcome for such a tough budgetary environment for the largest donors.”

Because of the types of countries with which it works, IDA gives out around 20 percent of its funding in grants, with the rest reserved for low-interest loans. As such, the programme’s funding is used up and must be replenished by donor countries every few years.

The Moscow summit this week was the 17th such replenishment, and the funding raised during this round is expected to last for three years, after it is phased in around mid-2014. This timeframe will include the post-2015 period, when the world is slated to set new aims for global development in the aftermath of the Millennium Development Goals (MDGs).

The World Bank says the current replenishment will be used to increase focus on climate change and gender equality, as well as to boost efforts to ensure equitable growth.

The money should go for “electricity for an estimated 15-20 million people, life-saving vaccines for 200 million children, microfinance loans for more than one million women, and basic health services for 65 million people,” the bank says. “Some 32 million people will benefit from access to clean water and another 5.6 million from better sanitation facilities.”

Exceptional circumstances

IDA will now be at the vanguard of the World Bank’s new plan to end extreme poverty by 2030, as unveiled by Kim earlier this year.

Yet with the after-effects of the global economic crisis continuing to roil traditional donor governments, it was unclear whether they would meet bank expectations. Just 46 countries pledged funding in Moscow, for instance, down from 51 during the last replenishment, in 2010 (though this could change slightly in coming months).

In anticipation of constricted purse strings, bank officials this year tweaked traditional guidelines. While in the past donor governments have contributed to IDA only through grants, this year they were offered the option of making contributions through concessional loans.

A bank spokesperson told IPS this option was offered “to provide contributing countries a way to increase their contributions to IDA, and ultimately for IDA to increase its ability to finance more investments in the poorest countries.”

The spokesperson, who noted the decision was taken only due to current “exceptional circumstances”, said a bit more than four billion dollars was pledged as loans, which will eventually have to be paid back. Given that donors typically make up only around half of the total replenishment (other arms of the World Bank Group and repayment of previous IDA loans make up the rest), this four billion dollars is thus a significant portion of the new replenishment.

“Global cuts to aid are costing lives, so the news that donors have made generous contributions to this fund for the world’s poorest is very welcome,” Nicolas Mombrial, who heads the Washington office of Oxfam, a humanitarian group, said Tuesday. But he cautioned that the new funding approach “is acceptable in a context of economic crisis, it should be a temporary fix and not a permanent way of operating.”

The bank notes that concessional lending has always played an important part of its financing structure.

“IDA has traditionally offered countries both loans on highly concessional terms as well as grants,” the spokesperson said.

“The low interest rate charged, the long maturities, and use of a ‘grace period’ amount to a large subsidy from donors to IDA. Increasing the pool of available financing actually increases our ability to have a stronger impact in poor communities.”

Further, CGD’s Morris notes that donor governments have been “very attentive” that loans do not supplant the grants that continue to make up most of IDA’s funding. He also says that the new funding structure will allow for a balance in terms of the varying dynamics among the countries IDA is assisting, particularly in the context of growing middle-income economies.

“They’re at a point in time where they have a large group of low-income countries with compelling financing needs, but over the medium term we’ll also see graduations of some of these countries – for instance, India – that implies less need over time,” he says.

“In this way, they’re able to keep things roughly in balance for IDA. While on the one hand they’re mortgaging their future to some degree, they’re doing it smartly.”

Jim Kim has suggested that middle-income countries made up a significant portion of IDA’s new replenishment.

Civil society monitoring

Others are focusing new attention on how exactly the bank is planning on using some of this new funding. Ahead of the Moscow summit, civil society groups in several major donor countries warned that recent policy documents have suggested that the bank is planning to increase its focus on major energy infrastructure, including large-scale dams.

This runs in the face of strengthening calls by some development experts for multilateral funders to focus instead on alleviating poverty and increasing resilience through small, local energy-generation options.

“We will monitor closely whether the World Bank invests its IDA funds into projects that can reduce poverty, or in mega-dams and fossil fuel projects that destroy the environment and don’t benefit poor people,” Peter Bosshard, policy director at International Rivers, an advocacy group, told IPS.

“We will encourage national parliaments to hold the World Bank to account for its lending decisions under IDA 17, and to shift resources to institutions better placed to reduce poverty if the Bank continues to support destructive energy projects.”

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WTO Urged Not to Treat Water Like Widgets http://www.ipsnews.net/2013/12/wto-urged-safeguard-water-amidst-negotiations/?utm_source=rss&utm_medium=rss&utm_campaign=wto-urged-safeguard-water-amidst-negotiations http://www.ipsnews.net/2013/12/wto-urged-safeguard-water-amidst-negotiations/#comments Wed, 04 Dec 2013 00:30:36 +0000 Carey L. Biron http://www.ipsnews.net/?p=129256 As government representatives gather Tuesday in Indonesia for what could be final negotiations towards a global trade agreement under the World Trade Organisation (WTO), environmentalists and social justice campaigners are urging them to specify that water resources cannot be treated as commodities. Critics of the privatisation and “financialisation” of natural resources are pointing to mounting […]

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A water truck in Port Louis, Mauritius. Credit: Nasseem Ackbarally/IPS

A water truck in Port Louis, Mauritius. Credit: Nasseem Ackbarally/IPS

By Carey L. Biron
WASHINGTON, Dec 4 2013 (IPS)

As government representatives gather Tuesday in Indonesia for what could be final negotiations towards a global trade agreement under the World Trade Organisation (WTO), environmentalists and social justice campaigners are urging them to specify that water resources cannot be treated as commodities.

Critics of the privatisation and “financialisation” of natural resources are pointing to mounting interest by multinational investors in viewing common water resources as tradable, a change that development advocates worry could impact particularly on poor and marginalised communities. While international agreements enshrined a universal right to water (and sanitation) in 2010, international trade agreements have yet to follow suit – a gap that some say is becoming increasingly dangerous.“These entities have made bets that water will eventually be distributed and sold much like petroleum is today." -- William Waren

“Our concern is that the financialisation and privatisation of water is already very much a long-term goal of major multinational companies and investors,” William Waren, a trade policy analyst with Friends of the Earth U.S., a watchdog group, told IPS.

“These entities have made bets that water will eventually be distributed and sold much like petroleum is today. They know that global warming will make water resources increasingly scarce, so they want to get ahold of these resources and eventually sell it at their asking price.”

Of those who have made such bets so far, Waren mentions Suez Environment, the French water giant, as well as T Boone Pickens, the U.S. oil tycoon-turned-alternative energy magnate. Regardless of where these investors are based, however, their focus is international.

Just ahead of the start of the WTO ministerial talks, taking place Tuesday through Friday in Bali, Friends of the Earth International offered a series of case studies on the experiences of a dozen countries around the financialisation of common water resources. The report argues that a confluence of international financial institutions and corporations are “paving the way” for this process.

Yet these forces are being offered crucial aid by international trade agreements, both the vagaries of current accords and the more explicit strategies in those still under negotiation, particularly spearheaded by the United States.

These “key drivers of the deregulation and liberalization processes that have opened the water and sanitation sectors to corporate profiting-making, and as key building-blocks to the architecture of impunity that protects it,” the report states.

“Standing out amongst them are the new and increasingly less transparent and non-democratic modalities of transoceanic partnerships led by the United States … and the World Trade Organization’s agenda on environmental services.”

Old public commons

Key in this discussion is an international trade agreement signed more than a half-century ago. The predecessor to today’s WTO, created in 1995, was an accord known as the General Agreement on Tariffs and Trade (GATT).

Today, GATT provisions continue to coordinate policy for the trade in physical goods. Yet Waren says neither GATT nor the WTO has ever clearly defined what constitutes a “good” or whether it includes water.

“The traditional view in international law is that water belongs to the public commons, so back in 1948 there was no consideration of what the big corporations are contemplating today – the complete control of the system from well to tap,” he says.

“So, we need to make sure there’s language in new trade agreements offering specific assurances that water is regarded as part of the public commons that is not a good or product.”

Likewise, the WTO’s discussion on trade in services remains under negotiation, largely made up of countries offering their own commitments. Yet thus far no country has made substantive commitments regarding domestic water supplies, while advocates worry that a suite of GATT commitments could substantially increase corporate control over common water resources.

Meanwhile, this week’s discussions in Bali are being seen as a last chance for the WTO to come to a multilateral agreement, as negotiations have dragged on under the current round of talks for a decade. Amidst mounting frustration, much of the momentum has instead shifted to state-to-state trade treaties and investment agreements.

Two of the largest ever contemplated are currently under negotiation, both led by Washington: the 12-member Trans Pacific Partnership and another free trade area between the United States and the European Union. If the two were to come to fruition, they would cover the vast majority of the world’s economy.

Yet these so-called U.S. models also come with stringent pro-business requirements and quasi-judicial enforcement mechanisms that put investors on the same level as sovereign states.

“There is a clear and present danger in these investment agreements, and water policy is an almost constant issue,” Waren says.

“Part of the problem is that much of investment case law has an explicit right to export. So countries acting to deal with a dwindling water supply, especially in the Global South, may not realise they’re giving the right to investors both to make investments and to export.”

And despite the United Nations’ 2010 agreement on the universal right to access to water, the international tribunals that adjudicate disputes under investment agreements typically don’t recognise international humanitarian law. For critics, such a system underlines the importance of the WTO explicitly engaging with the issue of water as a tradable good.

A third more expensive

It is somewhat ironic that the push towards increased multilateral financialisation of water could be coming from the United States, where the experience surrounding the privatisation of public water utilities has been notably negative.

The country’s largest private water company, American Water, was formerly owned by a German company. But that owner pulled out in large part due to public resistance towards both private and foreign ownership of water resources.

“There has clearly been resistance to private ownership,” Mary Grant, a researcher with Food & Water Watch (FWW), an advocacy group, told IPS. “Communities have made clear that they want local ownership of their systems in order to control both quality of service and the rates charged.”

FWW surveys have found that investor-owned utilities in dozens of U.S. states have typically charged a third more than those owned by the public, a lack of efficiency corroborated by other investigations. Profit-driven systems also experience problems in deciding where to extend service, with companies at times proving reluctant to do so in low-income areas or very small communities.

“The U.S. experience shows that water privatisation has been a failure,” Grant says. “It hasn’t resulted in better services even while it has led to higher rates and, often, worse service. Local, public provision is the most responsible way to ensure that everyone has access to safe and affordable water.”

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