Delivering the insufficient?

September 11, 2009

G20 finance ministers issue another bland statement

Bretton Woods Project, 10 September 2009

Despite spin doctoring that called it a triumph for cracking down on banking bonuses, the G20 finance ministers’ statement in early September produced an accounting for how the G20 met or did not meet existing promises and little new agreement. Once again the UK government excluded critical civil society from the discussions.

The summit, held in London in order to prepare the ground for the G20 leaders meeting scheduled for 24-5 September in Pittsburgh USA, was billed as a battle over bank bonuses, but the final communiqué was mostly a bland repetition of existing statements with plenty of escape clauses and pushing issues to other forums. On the fiscal stimulus and loose monetary policy that have been the mainstay of rich country responses to the financial crisis, it committed countries to continue “necessary financial support measures” but also “agreed the need for a transparent and credible process for withdrawing our extraordinary … support.”

The communiqué was short, with only seven paragraphs. It final two points served to report on the commitments made to strengthen the IMF and World Bank. The G20 hailed the “significant progress in strengthening the IFIs” but also said “more needs to be done”. For the pedantic, the change in language on IMF governance may look like a positive step forward. In April the G20 said “emerging and developing economies, including the poorest, should have greater voice and representation”, whereas in September it read “the voice and representation of emerging and developing economies, including the poorest, must be significantly increased.” A searching look at the accompanying “progress report on the actions of the London and Washington G20 summits” highlights the areas left vague.

SDRs go ahead at the IMF

The report confirms that the $500 billion promised to the IMF has yet to be delivered as it references only the “commitments of more than $250 billion”. Actually delivery has only come from Japan, Norway, France, Canada, China and the United Kingdom, totalling about $195 billion. The US commitment of $100 billion has been agreed through the New Arrangements to Borrow, which requires additional measures to activate. The IMF has committed about $173 billion overall (including loans made before the crisis), but it had about $250 billion in available capital before the agreement to boost its resources. Thus, the boost in resources has not yet been used to support any developing countries.

And while the London Summit called for a “doubling of the IMF’s concessional lending capacity for low-income countries”, this has been reinterpreted to be a simple doubling of concessional lending year-on-year rather than the overall pot of resources available for such lending. The Fund announced in late July an increase in expected concessional lending to $4 billion a year in 2009 and 2010 from about $1.2 billion on 2008.

The commitments on issuing special drawing rights (SDRs, see Update 65), the IMF-created reserve asset, were the most tangible and successful, with full allocation of SDRs as per the G20 communiqué. This included the final ratification of the fourth amendment to the IMF Articles of Agreement, which provides for an extraordinary allocation of SDRs to countries that joined the IMF between 1981 and 2009. Still most of the new SDRs go to rich countries and no progress was made on a method of re-allocation.

Some World Bank changes left vague

While the Bank did raise lending from about $30 billion to $60 billion in the last fiscal year, there was no quantitative reporting on the take up of programmes oriented at social protection and low-income countries. The communiqué indicates that the Rapid Social Response Fund (see Update 65) was agreed, but fails to say how much was provided, likely due to very low take up of the facility.

A paper on increasing the financial capacity of the Bank through a capital increase is promised for the annual meetings, while the Bank is still “developing an approach” to let some low-income IDA-eligible countries borrow more money on IBRD terms usually reserved for middle-income countries. The progress report said that the IMF and World Bank boards were both reviewing the debt sustainability framework, though the IMF board had actually met on 31 August, prior to the G20 meeting. The IMF’s agreed changes were announced on 9 September.

On the promise of increasing trade finance by $250 billion, the G20 produces an unreferenced figure of $65 billion having been taken up, though the only actual programme cited is the one by the World Bank’s International Finance Corporation (IFC), which received commitments of just $7.75 billion (see Update 66).

The promised G20-chair review of the IFI’s role and responsibilities, which was supposed to be personally handled by British prime minister Gordon Brown, is reported to be in “consultation with the G20, external academics and LICs.” There was little to no discussion on the matter with civil society, despite repeated questioning of the prime minsters’ office by NGOs about how a consultation would be run. In the end the exercise was contracted out to London-based think-tank the Overseas Development Institute, which placed a limited discussion note on its website and failed to alert more than its database of researchers about the online discussion forum.

Financial and tax regulation still pending

Despite the hype on bonuses, the communiqué merely asked for “global standards on pay structure” and called on the Financial Stability Board (FSB) “to report to the Pittsburgh summit with detailed specific proposals for developing this framework.” FSB standards are not legally binding and there is no mention in the communiqué of the idea that there should be a cap on the total bonus pool. As the FSB in basically a forum for discussion among the G20 and other governments, countries that have opposed strong regulation on financial sector remuneration such as the UK, will work hard to water down any proposals.

On the fight against tax evasion, there was recognition of the need for “developing countries [to] benefit from the new tax transparency, possibly including through a multilateral instrument.” However the use of the word “multilateral” was left vague. The OECD which has been the lead analytical body on tax matters often uses ‘multilateral’ to mean merely a series of bilateral agreements.

The G20 had previously agreed that all systemically important financial institutions should be regulated, but had left the definition of systemically important to the IMF, Bank for International Settlements (BIS) and the FSB. They promised to do it “by the next meeting of finance ministers and central bank governors.” However they failed to produce the guidelines on the definition by this early September finance ministers’ meeting. They have now promised to do it by November when the G20 finance ministers meet again.

Civil society exclusion

UK-based NGOs, the Jubilee Debt Campaign and Bretton Woods Project, had their accreditation for the G20 finance ministers’ meeting revoked by the UK Treasury just days before the summit. Representatives of both organisations had received notification of accreditation on Friday, 28 August. Both received emails late on 2 September saying “Unfortunately your accreditation has been withdrawn by HM Treasury. Please be aware that you will not be permitted access to the meeting venue or any of the press facilities.” No further information or reason was given for the withdrawal of accreditation for the NGOs.

The UK government also barred NGOs War on Want and the World Development Movement from attending the G20 London Summit in April. Nick Dearden, director of Jubilee Debt Campaign, said “It is outrageous that NGOs such as ours have again been banned again from attending G20 summits. The UK seems to be setting a precedent that it is acceptable to silence voices of dissent and prevent debate from being aired.” Both Bretton Woods Project and Jubilee Debt Campaign had been involved in a 4 September London action calling on the G20 to stop letting money rule the world on the day the summit commenced. UK NGOs Oxfam and ONE, which had not been listed as organisers of the action, were accredited and allowed into the summit venue.


No conditional World Bank fund for climate projects: Bangladesh Prime Minister

June 11, 2009

Staff Correspondent, NewAge, June 11, 2009

Prime minister Sheikh Hasina on Wednesday said the government would not take the World Bank’s fund, earmarked to help Bangladesh to tackle the adverse impacts of global warming, if it does not agree with conditions imposed by the global lender.

She said the government would take up a plan for dredging the major rivers, including the Padma, Meghna, Jamuna and Brahmaputra. 

‘We will not take the fund from the World Bank if we have to accept their conditions,’ said the prime minister in reply to a question in the parliament. ‘They will have to give us the fund as per our terms.’ 

She said that Bangladesh would get enough funds to face the adverse impacts of global warming.

As the developed countries are responsible for global warming, they will give Bangladesh funds to face the climatic catastrophes, said Sheikh Hasina. 

She said the government would propose allocation of Tk 300 crore in the new fiscal year’s budget to initiate adaptation measures to face the impacts of global warming. 

‘A guideline titled Bangladesh Climate Change Strategy and Action Plan has been formulated to face the probable disasters caused by climate change. A cabinet committee is working to finalise the action plan. Another cabinet committee is finalising the formation of the Climate Change Trust Fund with budgetary allocation,’ she informed the House. 

Sheikh Hasina said the government plans to dredge the major rivers in order to prevent desertification and facilitate flood control and land reclamation. 

‘I myself will head the committee to be manned by ministers for some related ministries including finance, planning and agriculture. It will require a huge amount of money for dredging the rivers, but we will do it,’ she said. ‘Regular maintenance dredging will also be continued.’ 

She said the government had already started discussion with the World Bank, the Netherlands and other lenders to get assistance for river dredging.

‘In the past the lenders were unwilling to provide funds for dredging, but now they are responding to our requirements. I signed a file today to send a representative to the World Bank to discuss various programmes including dredging of the rivers,’ said the prime minister. 

Answering another question raised by independent lawmaker Mohammad Fazlul Azim, the prime minister said the government had a plan to form marine police as part of the existing police force to root out pirates and forest bandits in the deep sea and Sunderban.

‘There is also a plan to increase the manpower of thana police and provide speedy vessels to them for the same purpose,’ she said.

The prime minister said the law enforcement agencies under the home ministry were carrying out their responsibilities with utmost sincerity and integrity to ensure safety and security on river routes, and check smuggling in coastal areas, piracy, trawler robbery and abduction of fishermen.

‘These agencies like Coast Guard, BDR, RAB and police are engaged in checking smuggling and piracy and also ensuring safety of the fishermen,’ she said. 

Hasina said the present government had undertaken steps to further strengthen the Coast Guard and make it more effective.

She said the river patrol teams of police were active in eliminating pirates, forest and land robbers in the rivers and char areas of the coastal districts.

She also told the house that setting up of river police outposts and investigation centres in coastal char areas was under process. ‘Security of life and property of the people there will be ensured if the outposts and investigation centres are established,’ she said.

WB finds its projects vulnerable to graft

June 7, 2009

Tanim Ahmed, NewAge, June 7, 2009

The World Bank does not have sufficient mechanism to prevent fraud and corruption in projects it funds in different developing countries, an internal report of the multilateral lending agency revealed.

The ‘Review of IDA Internal Controls’, released in April this year by the World Bank’s Internal Evaluation Group, analysed internal procedures and mechanisms of the International Development Agency, the soft loan window of the World Bank group, which disburses most of the concessionary loans to developing countries like Bangladesh.

The relevant section of this report (Annex D of the second volume) indicates that despite the World Bank’s rhetoric, including high-sounding sermons on governance and corruption, the agency is yet to craft a sound mechanism for itself to prevent corruption in its projects.

The report states that the multilateral donor agency lacks specific tools to prevent fraud and corruption in its operations.

Based on the evidence and agreed criteria, the evaluation group concluded that weakness in existing framework of controls to address fraud and corruption issues give rise to corrupt practices when it comes to implement projects in the developing countries.

‘While commitment to integrity has always been and remains a central feature in the Bank, there are also aspects of the culture that have resisted dealing openly with the potential for F&C at the local level in Bank and IDA operations.’

Mehrin A Mahbub, public information associate of the World Bank’s Bangladesh office, told New Age on Monday that governance was indeed one of the pillars of the agency’s ongoing work.

She said the new disclosure policy of the World Bank would bring in major changes. ‘The consultations are fully open and ongoing.’

Mehrin also pointed out that the lending agency had a strong procurement guideline that was strictly enforced.

The agency’s internal report observed that such gaps would remain unless the recommendations of the Volcker report, which are apparently ongoing, are implemented fully to become operationally effective.

The Volcker report was an independent evaluation of the World Bank’s Department of Institutional Integrity conducted by a panel headed by Paul A Volcker, former chairman of the United States Federal Reserve Board.

Released in 2007 amid notable media hype, the report stated that although the department of integrity had achieved some success, ‘there were serious operational issues and severe strains in relations with some operations units have arisen, at times contributing to counter-productive relations between the Bank and borrowers and the funding partners’.

There have also been previous reports regarding corruption at the World Bank. In a series of hearings in the US Senate Foreign Relations Committee in May 2004, witnesses testified that as much as US$ 100 billion might have been lost to corruption in World Bank projects.

Corruption within the lending agencies take on added significance in the context of the global financial crisis and the initiative to strengthen and enlarge their lending programmes in the developing world.

Mustafizur Rahman, executive director of Centre for Policy Dialogue, a Dhaka-based civil society think tank and research organisation, said that he thought the issue of lenders’ accountability and transparency was crucial in that context.

‘We have severe limitations of funds and resources and therefore are almost compelled to seek assistance from these agencies. But in order to ensure appropriate and effective utilisation of those funds, these lending institutions will also have to ensure their own accountability and governance.’

Mustafiz also said that the lending agencies, where the developing world has very little voice, should bring about structural reforms within them. ‘It is important that countries like Bangladesh get to have a voice in these reforms and how these agencies are run.’

Anu Muhammad, a professor of economics at Jahangirnagar University, also secretary of a citizens’ platform critical of the neo-liberal establishment, said corruption was actually inherent to the World Bank programme. ‘I have held it for long that it is only because of corruption that the World Bank is able to operate in Bangladesh. It would be impossible to run the kind of projects that these agencies support without a corrupt system in place.’

He said that without exception the World Bank was openly critical of countries or regimes that even strived towards a system genuinely free of corruption. ‘This is a vicious cycle. These lending agencies promote corruption through their projects and on the other hand, pontificate us on the evils of corruption.’

Half of the 74 Privatised State Owned Enterprise (SoEs) Closed Down in Bangladesh

April 26, 2009

NewAge, April 25, 2009

Almost half of the 74 state-owned enterprises divested in the past were closed down that raised question about the quality of ‘so called privatisation’.

A total of 74 state-owned enterprises belong to textiles, jute, manufacturing, chemicals, food, leather and banking sector were sold out since the establishment of the Privatisation Board in 1993 and thereafter the Privatization Commission in 2000.


A closed state-owned jute mills. — New Age photo

Of them, 54 were divested through outright sale and 20 through off-loading of shares by suggestion of the lending agencies especially the World Bank.

Among the privatised enterprises, which are still in business limp badly, they said.

Serious questions can be raised about the privatisation process itself, said Bangladesh Enterprise Institute president Farooq Sobhan. He suggested changes to the existing privatisation process.

Industries minister Dilip Barua, has, however, favoured a provision to halt privatisation of the state-run entities.

He made his intention clear while unveiling the draft of the new industrial policy on Saturday at local hotel.

’Many privatised factories remain inoperative or non-functional under new ownership. In some cases, land is sold off after take-over,’ he said.

Apart from 74 SOEs, some 24 SoEs have already been listed by the commissions to get them disposed off under a World Bank’s multi million ‘bank modernisation and enterprise growth’ project.

Tenders have already been called for three SoEs.

Around 305 state owned enterprises comprising industrial, commercial and financial institutions were put under public ownership in 1974-75.

The size of the public sector enterprises have reduced considerably after the paradigm shift in the government’s economic policy towards privatisation.

However, in name of privatisation successive governments sold out many viable SoEs at very cheap rate, said an official of the Bangladesh Forest Industries and Development Corporation.

He said Wood Treating Plant at Daulatpur in Khulna was divested to private entrepreneur although the organisation was running on break event and employed more than 200 workers.

A relative of the than privatisation commission chairman purchase the plant and curtailed more than 150 workers.

The abortive attempt to privatise Rupali Bank, country’s fourth largest commercial bank, has added further burden on the government exchequer, said the finance ministry officials.

 The three-year long unsuccessful bargaining with A Saudi prince deteriorated the financial position of the loss making bank that was put on sale in 2005.

World Bank loses legal battle to sacked official in Bangladesh

April 7, 2009

Staff Correspondent, NewAge, April 7, 2009

The World Bank lost for the fourth time a legal battle in Dhaka, as the Appellate Division of the Supreme Court on Monday upheld the High Court’s verdict that had ordered a Dhaka court to dispose of a case filed in 2001 by a fired local official against the World Bank within six months.

The Appellate Division rejected the petition filed by the WB to seek permission to appeal against the High Court’s verdict delivered on June 5, 2008.

The High Court bench of Justice SK Sinha on June 5, 2008 delivered the verdict, rejecting a petition filed by WB for dismissal of the case on grounds of inadequate court fees.

This was the latest of a series of rejections by the court of the WB’s petitions filed in the last seven years since the former external affairs officer of the bank’s Dhaka office, Ismet Zerin Khan, sued it, challenging her termination in 2001.

‘The suit relates to service matter. It was instituted in the year 2001 and a suit of this nature deserves preference to other suits in the matter of disposal,’ observed the High Court in its verdict, and ordered the trial court to dispose of the case in six months, ‘taking into consideration the fact that in the meantime about seven years have elapsed and no witness has yet been examined’.

The international lending agency appealed to the High Court in 2001, claiming that it should enjoy immunity from any lawsuit in Bangladesh, and secured a stay order on the case.

On 9 August, 2005, the Appellate Division of the Supreme Court rejected an appeal filed by the WB and ordered the trial court to hear the suit. It also ordered the trial court to dispose of the case in six months.

The WB had also tried to get a law enacted which would provide it with immunity from any lawsuit in the country. No such law, however, has yet been enacted.

Govt control over climate change funds must not be compromised

March 16, 2009

Editorial, NewAge, March 16, 2009

WHEN the finance adviser of the immediate-past interim government declared last September that Bangladesh’s estimated $5 billion climate adaptations fund would be managed by the World Bank, there was broad opposition to this plan within the government, and among NGOs and civil society groups. We warned at the time that the bank’s involvement would not only undermine our government’s control over the funds but also compromise the country’s position at UN negotiations, where the LDC group, of which Bangladesh is a key member, are demanding that funds stay outside of the control of multilateral lenders. This danger has sadly become relevant once again, as negotiations may once more be ongoing to task the bank with the responsibility of managing the multi-donor trust fund. According to a New Age report published on Sunday, the Campaign for Sustainable Rural Livelihoods — a network of over 150 local NGOs involved with climate change — has warned that the UK government, one of the major donors, may be pressuring the government to task the bank as manager, despite its reassurances earlier that it was the Bangladesh government’s prerogative to choose the mechanism through which this fund would be administered.

Our reservations with the World Bank and its activities are based on the knowledge of decades of bitter experiences that Bangladesh and a large number of least developed countries can speak of in their dealings with the bank. For one, the World Bank suffers from a serious lack of transparency in its decision making and its financial dealings, leaving scope for massive internal corruption which has, time and again, been exposed from within the Bank’s own books. Secondly, the bank has a record for imposing secret and unrelated conditionalities that governments of least developed countries are often expected to satisfy before they qualify for funds. Such conditionalities have received widespread criticism for causing fragile economies to collapse through the dismantling of a nation’s tariff regimes, to give one example, often causing local industry and agriculture to lose their markets to cheap exports. If the World Bank is the manager of this massive fund, conditionalities will no doubt have to be met on how the funds are spent, when, and to buy what. These are all decisions that the government of a sovereign people’s republic of Bangladesh should be free to decide, and not a multilateral lender with a shameful record for economic predation and corruption. Thirdly, the World Bank will no doubt charge a fee for the management of the fund — even a seemingly paltry 1 per cent is $50 million — which could comfortably finance a national equivalent management body for much more than a few decades.

Given these realities, we believe it is in the national interest of Bangladesh to assert the government’s — and hence the people’s — right to control and administer funds raised for Bangladesh’s efforts to combat the fallout of manmade climate change. It is important to remind the donors that climate funding is largely seen as a compensation for the industrial excesses of the west over the past century and the traditional donor-recipient formula is not acceptable under these circumstances.

Climate Change Fund Management Committee: Bangladesh government urged not to include World Bank in the body

March 15, 2009

Staff correspondent, NewAge, March 15, 2009

The leaders of the Campaign for Sustainable Rural Livelihoods, an alliance of more than 150 local, national and international development agencies, have urged the government not to incorporate the World Bank in the climate change fund management committee of the government.

Although the government of the United Kingdom had pledged to donate funds for combating the impact of climate change following the suggestion by the Bangladesh government, the UK government now is preferring the ‘multi donor trust’ in the name of the WB, claimed the forum leaders.

Their demands were presented at a press briefing organised by the CSRL at the Dhaka Reporters Unity on Saturday. Member secretary of the forum, Ziaul Haque Mukta read out the demands.

The national plan on climate change and its financial disbursement system should formulate a well-coordinated system with the participation of different public and private development organisations and the civil society, combining the efforts of the affected people. But it should not be led by any donor countries, agencies or the WB, they argued.

They also urged the government to form a national board on climate change, incorporating all the private and public sector agencies, concerned ministries and the affected people to face the overall impact of climate change.

The national board should also formulate a comprehensive plan on climate change and coordinate all its programmes including ratification of the project, fund collection, monitoring and evaluation, they said at the briefing styled ‘climate change : national plan and financing.’

Although Bangladesh has already formulated a national strategy and an action plan on climate change, based on the consultation between the government officials and the representatives of the non-government and donor organisations, the action plan has ignored participation of the affected people, political parties and the experts, they said.

Although the national strategy and the action plan put emphasis on the adaptation method, it did not consider the issue of possible loss of homesteads by several crores of people at the coastal regions and the necessity of local and international migration as an adaptation strategy under the plan, they pointed out.

Among others, the chairperson of the CSRL, Shirin Akhter and climate expert, Ahsan Uddin attended the briefing.