Change to big World Bank aid projects could cede policing to governments

by Reuters
Friday, 25 July 2014 17:38 GMT

By Anna Yukhananov

WASHINGTON, July 24 (Reuters) - The World Bank is considering putting governments in charge of policing its aid projects, a move watchdog groups worry could undermine social and environmental safeguards the lender currently has in place.

The proposal, outlined in a draft document obtained by Reuters, would represent the biggest shake up in 20 years to the policies governing how the bank's big development projects are monitored. Proponents say it would allow more flexibility and less red tape and is necessary to adjust to a world in which the World Bank is not the only major development player.

Under the plan, client states could be called on to carry out their own assessments before a project begins, and apply their own rules to ensure no harm during implementation. That means Brazil's ministry of planning, for example, could apply its own social and environmental guidelines when it uses World Bank money to build a new bridge, as long as the lender deems its protections "acceptable."

The bank's board will discuss the draft framework next week and it will face at least one more round of consultations with governments, non-profit groups and affected communities before being put in place in the second half of 2015.

The planned change comes as the World Bank, which committed $61 billion in financing in the year ending in June, seeks to expand funding of large infrastructure projects, which typically have a big impact on the environment and often involve getting people to move from their homes.

Rights and environmental groups worry the bank would cede authority to corrupt or ineffective governments under the proposal. Other critics say many poorer nations lack the funds or skills to implement rigorous standards.

"What (the draft) doesn't unfortunately outline is the kind of minimum standards that would be necessary in order for the bank to trust the borrowing country," said Jessica Evans, a senior advocate with Human Rights Watch in Washington. "And leaving that at the discretion of staff ... is problematic."

The Washington-based lender, which has spent nearly two years reviewing its loan protections, said it aims to keep the safeguards as strong as ever.

"We want a new and strong environmental and social set of policies that will support sustainable development through standards that are clear to those impacted by the projects we finance, those who implement, and those holding us to account," said bank spokesman David Theis.

He declined to comment on the specifics of the new framework because they are still under review.


The proposed changes are part of a wider trend in development lending that aims to rely more on agencies and institutions that already exist within countries, rather than creating new systems from scratch for each project.

Supporters argue countries would find it easier to work with multiple development agencies if they can use their own standards instead of adjusting to others' rules, and that the measures would help governments improve their own institutions.

Officials familiar with the bank's thinking say the old approach to safeguards, where the bank imposed its standards, is outdated when World Bank funds make up only a fraction of development support for any individual country.

And rival development banks, such as those from national governments like China or the new development bank launched by the wider group of BRICS emerging markets, are often willing to fund projects with fewer conditions attached.

World Bank President Jim Yong Kim has sought to make the development institution faster and more nimble, and to encourage more risk-taking in lending.

The bank's board largely supports these efforts and believes the lender must move away from the idea that all risks can be addressed before a project begins, according to a person familiar with the board's thinking. The person spoke on condition of anonymity because the board has not discussed the proposals yet.

Despite the bank's assurances it will focus on new risks outside of the strictly financial, such as climate change and social issues such as discrimination, non-profit groups fear the new system will not be any better.

They also worry the bank is backpedaling on protections for indigenous groups under the urging of some African and Latin American governments, according to three people familiar with the matter.

"The draft confirms our fears that protections for the poor and environment will be significantly weakened, contrary to past promises by President Kim," said Nezir Sinani of the Bank Information Center, a watchdog group. (Reporting by Anna Yukhananov; Editing by Frances Kerry)

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