Large-scale energy and logistical infrastructure initiatives in Brazil are notorious for their delays. The majority of railways, ports, highways and power plants are several years behind schedule. Credit: Darío Montero/IPS

By Kanya D'Almeida
NEW YORK, Jun 11 2015 (IPS)

According to new data released by the World Bank Tuesday, investments in infrastructure in 139 emerging economies shot up to 107.5 billion dollars in 2014, with just five countries – Brazil, Colombia, India, Peru and Turkey – accounting for 73 percent of the total.

The update, published by the Bank’s Private Participation in Infrastructure (PPI) database, reveals that projects with private participation in the water, energy and transport sectors totaled 51.2 billion in the first half of 2014, compared to 41.7 billion in the first half of 2013.

"The concept of ‘appropriate scale’ has been deleted from […] policy discourse because now instead of ‘small is beautiful’, the catchphrase is ‘big is better’.” -- Nancy Alexander, director of the Economic Governance Program at the Heinrich Böll Foundation
Based on a review of investments in some 6,000 projects in 139 low- and middle-income countries between 1990 and 2014, the data show that the energy sector accounted for the greatest number of new projects, but the transport sector captured the largest amount of investment, securing 55.3 billion dollars or 51 percent of the total.

Some 33 road construction projects attracted 28.5 billion dollars in investment, with four of the top five road projects in Brazil and one in Turkey. Five airport projects secured 13.2 billion dollars in investment commitments.

Driven largely by massive infrastructure booms in Brazil, Colombia and Peru, Latin and America and the Caribbean accounted for 55 percent of global investments, snagging 69.1 billion dollars last year.

These mega-projects include 11 major ventures, eight of them in the energy sector, in Peru alone, amounting to over eight billion dollars, the largest of which, the Lima Metro Line 2, brought in 5.3 billion dollars in investment.

Not all regions are seeing an increase. Both India and China experienced declines last year, with the latter witnessing its lowest infrastructure investment levels since 2010, at 2.5 billion dollars. India’s commitments dropped down to 6.2 billion dollars.

In sub-Saharan Africa investment plunged from 9.3 billion in 2013 to 2.6 billion in 2014, although increased infrastructure activity in Ghana, Kenya and Senegal suggests that the downward trend might soon be reversed.

Despite uneven investment levels globally, the Bank estimates that spending on infrastructure projects in 2014 represents 91 percent of the five-year average between 2009 and 2013.

In a statement released on Jun. 9, Bank officials claimed, “This is the fourth highest level of investment commitments ever recorded, exceeded only by levels seen from 2010 through 2012.”

What this data reveals is that a global consensus to bolster public-private partnerships in mega-projects is bearing fruit.

Practically every major international organisation from the United Nations to multilateral development banks believe that strengthening road, energy and transport networks are crucial at a time when one billion people lack access to an all-weather road, 783 million people live without clean water supplies and 1.3 billion people are not connected to an electricity grid.

But a closer look at the track records of these gigantic infrastructure projects and new plans for financing them suggests that pouring billions of dollars into highways and dams in the developing world not only enriches some of the wealthiest sectors of the population, they also threaten to further impoverish the poorest, thereby widening global inequality.

‘Appropriate Scale’ – a thing of the past

The world’s most cited scholar on mega-project management and planning, Bent Flyvbjerg of Oxford University, found that on average only one in 1,000 mega-projects is completed on time, within its stated budget and with the ability to deliver what was promised.

Flyvbjerg’s extensive database on the subject reveals that approximately nine out of every 10 large-scale projects incur cost overruns, often over 50 percent of the stated budget – an expense borne primarily by taxpayers.

According to Nancy Alexander, director of the Economic Governance Program at the Heinrich Böll Foundation, these massive projects can cost “potentially billions and trillions of dollars, so when they go over budget and over time, they can devastate the national budget of a country.”

Alexander told IPS that, while there is a very real need for improved infrastructure, particularly in developing countries, there is an equally urgent need to tailor such ventures towards those who would most benefit from the services.

“Whether they are in education, healthcare, water or electricity, projects really need to be appropriate in scale to meet their goals. But the concept of ‘appropriate scale’ has been deleted from […] policy discourse because now instead of ‘small is beautiful’, the catchphrase is ‘big is better’.”

Part of the reason for this change, experts say, is the push to use investment in infrastructure to finance development, particularly by strengthening public-private partnerships and by ‘financialising’ investment.

Research by the Heinrich Böll Foundation reveals that the G20 group of major economies aims to finance the so-called infrastructure gap by tapping into the roughly 80 trillion dollars in long-term private institutional finance – from pension funds to insurance schemes – by creating infrastructure as an “asset class”.

Under this model, governments will undertake a range of public-private partnerships (PPPs) and financial institutions will package and sell financial products “that offer long-term investors a stake in a portfolio of PPPs”.

“When speculators take stakes in physical infrastructure,” the organisation says, “such infrastructure is subject to the whims of herds of investors [and] could trigger instability in the provision of basic services.”

Already, a lack of evidence on the success of PPPs suggests that the current pace of investment in infrastructure with private participation is at best a gamble – and at worst a recipe for disaster.

In a sample of 128 World Bank-financed public-private partnerships, 67 percent of those in the energy distribution sector failed, as did 41 percent of those in the water sector. These are the findings of the World Bank’s own independent evaluation group (IEG).

Other research indicates that mega-projects seldom lead to improvement in access to basic services, since many such ventures are undertaken to serve global, rather than local, demand.

“Energy projects, for instance, are often launched to serve a mine, or you’ll see a dam or power plant built for the same purpose – as is the case with the Inga Dam in the Democratic Republic of the Congo,” Alexander explained.

The very countries highlighted in the Bank’s latest update have a poor track record of successfully managing mega-projects.

Large-scale energy and logistical infrastructure initiatives in Brazil, for instance, are notorious for their delays, while the majority of railways, ports, highways and power plants are several years behind schedule.

Meanwhile, back in April, an expose published by the International Consortium of Investigative Journalists (ICIJ) revealed that in the course of a single decade, some 3.4 million people were evicted from their homes, torn away from their lands or otherwise displaced by projects funded by the World Bank.

Fifty percent of those displaced by large-scale ventures – ostensibly aimed at improving water and electricity supplies or beefing up transport and energy networks in some of the world’s most impoverished nations – reside in Africa, or one of three Asian nations: China, India and Vietnam.

The investigators further alleged that the Bank and its private-sector lending arm, the International Finance Corp, pumped 50 billion dollars into projects that financed governments and companies accused of human rights violations.

Brent Blackwelder, president emeritus of Friends of the Earth International, told IPS that “planning bigger and bigger projects despite the failure rate proves what Einstein said: that the definition of insanity is doing the same thing over and over again and expecting different results.”

Edited by Kitty Stapp

Nearly 50 percent of the estimated 3.4 million people who were physically or economically displaced by World Bank-funded projects in the last decade were from Africa and Asia. Credit: Abdurrahman Warsameh/IPS

By Kanya D'Almeida
UNITED NATIONS, Apr 16 2015 (IPS)

An expose published Thursday by the International Consortium of Investigative Journalists (ICIJ) and its media partners has revealed that in the course of a single decade, 3.4 million people were evicted from their homes, torn away from their lands or otherwise displaced by projects funded by the World Bank.

Over 50 journalists from 21 countries worked for nearly 12 months to systematically analyse the bank’s promise to protect vulnerable communities from the negative impacts of its own projects.

"The situation is simply untenable and unconscionable. Enough is enough.” -- Kate Geary Oxfam’s land advocacy lead
Reporters around the world – from Ghana to Guatemala, Kenya to Kosovo and South Sudan to Serbia – read through thousands of pages of World Bank records, interviewed scores of people including former Bank employees and carefully documented over 10 years of lapses in the financial institution’s practices, which have rendered poor farmers, urban slum-dwellers, indigenous communities and destitute fisherfolk landless, homeless or jobless.

In several cases, reporters found that whole communities who happened to live in the pathway of a World Bank-funded project were forcibly removed through means that involved the use of violence, or intimidation.

Such massive displacement directly violates the Bank’s decades-old Twin Goals of “[ending] extreme poverty by reducing the share of people living on less than 1.25 dollars a day to less than three percent of the global population by 2030 [and] promote shared prosperity by improving the living standards of the bottom 40 percent of the population in every country” – goals that the Bank promised to “pursue in ways that sustainably secure the future of the planet and its resources, promote social inclusion, and limit the economic burdens that future generations inherit.”

Far from finding sustainable ways of closing the vast wealth gaps that exist between the world richest and poorest people, between 2009 and 2013 “World Bank Group lenders pumped 50 billion dollars into projects graded the highest risk for “irreversible or unprecedented” social or environmental impacts — more than twice as much as the previous five-year span.”

The investigation further revealed, “The World Bank and its private-sector lending arm, the International Finance Corp., have financed governments and companies accused of human rights violations such as rape, murder and torture. In some cases the lenders have continued to bankroll these borrowers after evidence of abuses emerged.”

Nearly 50 percent of the estimated 3.4 million people who were physically or economically displaced by large-scale projects – ostensibly aimed at improving water and electricity supplies or beefing up transport and energy networks in some of the world’s most impoverished nations – reside in Africa, or one of three Asian nations: China, India and Vietnam.

Between 2004 and 2013, the World Bank, together with the IFC, pledged 455 billion dollars for the purpose of rolling out 7,200 projects in the developing world. In that same time period, complaints poured in from communities around the world that both the lenders and borrowers were flouting their own safeguards policies.

In Ethiopia, for instance, reporters from the ICIJ team found that government officials siphoned millions of dollars from the two billion dollars the Bank poured into a health and education initiative, and used the money to fund a campaign of mass evictions that sought to forcibly remove two million poor people from their lands.

Over 95,000 people in Ethiopia have been displaced by World Bank-funded projects.

Financial intermediaries

In a report released earlier this month, Oxfam claimed that the “International Finance Corporation has little accountability for billions of dollars’ worth of investments into banks, hedge funds and other financial intermediaries, resulting in projects that are causing human rights abuses around the world.”

In the four years leading up to 2013, Oxfam found that the IFC invested 36 billion dollars in financial intermediaries, 50 percent more than the sum spent on health and three times more than the Bank spent on education during that same period.

The new model, of pumping money into an investment portfolio in financial intermediaries, now makes up 62 percent of the IFC’s total investment portfolio, but the “painful truth is that the IFC does not know where much of its money under this new model is ending up or even whether it’s helping or harming,” Nicolas Mombrial, head of Oxfam International’s Washington DC office, said in a statement on Apr. 2.

Investments made to what the Bank classifies as “high-risk” intermediaries have caused conflict and hardship for thousands on palm oil, sugarcane and rubber plantations in Honduras, Laos, and Cambodia; at a dam site in Guatemala; around a power plant in India; and in the areas surrounding a mine in Vietnam, according to Oxfam’s research.

In response to widespread criticism over such lapses, the Bank is now in the process of overhauling its safeguards policy, but officials say that instead of making vulnerable communities safer, the new policy will only serve to increase their risk of displacement.

Citing current and former Bank employees, the ICIJ investigation claims, “[The] latest draft of the new policy, released in July 2014, would give governments more room to sidestep the Bank’s standards and make decisions about whether local populations need protecting.”

In a response to the ICIJ investigation released today, Oxfam’s land advocacy lead Kate Geary stated, “ICIJ’s findings echo what Oxfam has long been saying: that the World Bank Group – and its private sector arm the IFC in particular – is sometimes failing those people who it aims to benefit: the poorest and most marginalised […].

“It’s not just Oxfam and the ICIJ who say this – these disturbing findings are backed up by the Bank’s own internal audits which found, shockingly, that the Bank simply lost track of people who had to be “resettled” by its projects. President Kim himself has acknowledged this as a failure – and he’s right. The situation is simply untenable and unconscionable. Enough is enough.”

She stressed that the Bank must “provide redress through grant funding to those people it has displaced and left worse off […], enact urgent and fundamental reforms to ensure that these tragedies are not repeated [and] revise its ‘Action Plan on Resettlement’, released just last month by Kim in response to the critical audits, because it is inadequate to stem the terrible results of the worst of these projects.”

Edited by Kitty Stapp

Street vendors in Africa reflect the income inequality that pervades the continent, much of it due to corruption. Credit: Jeffrey Moyo/IPS

By Jeffrey Moyo
HARARE, Feb 21 2015 (IPS)

Reports this year of illicit moneys from African countries stashed in a Swiss bank – indicating that corruption lies behind much of the income inequality that affects the continent – have grabbed international news headlines.

Secret bank accounts in the HSBC’s Swiss private banking arm unearthed this year by the International Consortium of Investigative Journalists (ICIJ) were said to hold over 100 billion dollars, some of which came from Africa, including some of the poorest nations on the continent.

When these funds leave the region, they deny the very nations that need them most.

For example, at least 57 clients of the Swiss HSBC bank associated with Uganda were reported to be worth at least 159 million dollars. The World Bank has estimated that Uganda loses more than 174.5 million dollars in corruption annually.“Income inequality begins with our political leaders and corrupt wealthy business people who, more often than not, illicitly own the resources of the [African] continent” – Claris Madhuku, Platform for Youth Development, Zimbabwe

It is not a crime for Africans to have a Swiss bank account. But questions are now being raised by local tax offices as to whether the proper taxes were paid on the stashed amounts.

In South Africa, the head of the Revenue Service, Vlok Symington, said his office was analysing the information. “Early indications are that some of these account holders may have utilised their HSBC accounts to evade local and/or international tax obligations,” Symington was reported as saying by the South Africa Sunday Times.

“Income inequality begins with our political leaders and corrupt wealthy business people who, more often than not, illicitly own the resources of the continent,” Claris Madhuku, director of the Platform for Youth Development, a democracy lobby group in Zimbabwe, told IPS.

Diamonds, for example, which have made many traders wealthy, are often mined by the poorest of the poor, treated almost as slaves in war-torn African countries, despite the Kimberley Process Certification Scheme, which was established in 2003 to prevent the flow of these diamonds.

“It’s a case of greed and corruption,” thundered Zimbabwean independent political analyst, Ernst Mudzengi. “Africa has parasitic politicians who are primarily concerned with self-centred political power and economic gain as ordinary Africans remain at the periphery in poverty,” Mudzengi told IPS.

Development experts here attribute income inequalities to the continent’s lax anti-corruptions laws.

“African countries do not have sound anti-corruption laws and politicians and the rich amass too much power exceeding even the powers of the police here, leaving them with the liberty to accumulate wealth overnight by whatever means without being questioned,” Nadege Kabuga, an independent development expert in Kigali, Rwanda’s capital, told IPS

“It’s shocking how huge banks such as HSBC have created a system for enormously profiteering at the expense of impoverished ordinary people, worse by assisting numerous millionaires from Africa in particular to evade tax payment, disadvantaging the already poor,” Zenzele Manzini, an independent economist based in Mbabane, the capital of Swaziland, told IPS .

“Very often, government directors, ministers and their secretaries are the ones globetrotting on government businesses, awarding themselves huge allowances and the lower government workers remain stuck at the periphery with no extra benefits besides the meagre salaries they get monthly,” a top Zimbabwean government official in the Ministry of Labour, told IPS on the condition of anonymity, afraid of victimisation.

Writing for Financial Transparency Coalition, a global alliance of civil society organisations and governments working to address inequalities in the financial system, Koen Roovers, the coalition’s European Union (EU) Lead Advocate, asked the deeper question: “How do we prevent this in the first place?”

To catch fraud sooner rather than later, capacity in developing countries must be increased, Roovers said. “The scale of the challenge is significant: the UK-based charity Christian Aid has estimated that sub-Saharan Africa would need around 650,000 more tax officials to reach the world average.”

Rich states have promised help to poor countries to build the capacity they need, but these commitments have yet to be honoured.

Researchers at the U.S.-based Global Financial Integrity, a non-profit organisation working to curtail illicit financial flows, said developing nations have lost almost one trillion dollars through illicit channels.

Without clearly defined measures to curb income inequalities, economists say the African continent may be headed for the worst levels of poverty set to hit even harder at the already poor.

“Africa may keep facing perpetual poverty amid rising income inequalities because governments here have no institutions and expertise to identify and halt money laundering by corrupt wealthy individuals and politicians evading tax,” Zimbabwean independent economist, Kingston Nyakurukwa, told IPS.

According to Roovers, “criminals and their enablers are creative, so the only way to prevent future scandals is to shed light on what criminals and tax dodgers are trying to hide. This is why online registers of assets for all legal persons and arrangements are necessary and should be publicly available.

“If we turn a blind eye to these loopholes,” he added, “economic development for all will continue to be undermined by illicit actors looking to exploit them.”

Edited by Lisa Vives/Phil Harris