Everything You Ever Wanted to Know About the World Bank (in South Asia)
Not every project that the World Bank proposes to the countries of South Asia is in their interest. So how do you go about challenging the Bank?
Joe Wood is probably the most powerful man in South Asia although hardly a man, woman or child in the hundreds of thousands of villages and cities in the Subcontinent would be able to tell you what he does or where he works. Yet, from his office, Mr Wood has a major say in the budgets of every one of the seven South Asian countries. In 1995 alone, he presided over USD 3 billion in projects across the Subcontinent, ranging from health care to mega-dams. In the 52 years of its existence, his institution has loaned over USD 59 billion to projects to South Asia, from highways in the Himalaya to fisheries in Indian Ocean atolls.
Mr Wood (picture above) is Vice President of the World Bank and Director of its South Asia Regional Office.
A US citizen who went to school at Yale, the University of Munich and Oxford, Mr Wood does not work in Karachi, Dhaka or New Delhi. Neither does his right-hand man, Heinz Vergin, a German who studied in Berlin, the London School of Economics and the University of Minnesota, and who oversees all the Bank projects work in Bhutan, India and Nepal.
For the past 28 years, Mr Wood has reported for work to two buildings that lie a scant four blocks from the White House. Wood works at 701 Nineteenth Street and his assistant, Mr Vergin, on the third floor of 1776 G street—both of which are part of a complex of buildings in Washington DC that house the headquarters of the World Bank.
Ten Nepali activists had a unique opportunity to do battle with Mr Wood in late June 1994 when they came to this city to question a proposed World Bank loan for a billion dollar dam on the Arun River in east Nepal. Dressed uncomfortably in suits and ties, the activists sat down to argue with his staff about the high cost of the project (more than the annual budget of the kingdom) as Mr Wood moderated the discussion.
Mr Wood´s position was clear. "We are not in the business of negotiating this (project) with interested parties. Our obligation is to consult to try and improve the quality," he told those gathered in the room. That was not entirely correct, of course, for the World Bank had for long appointed itself as the "lead agency" for developing Nepal´s power sector, making plans and directing affairs to the extent of choosing feasible projects, demanding fiscal discipline, and raising electricity tariffs.
And so, a year later, the Nepali activists might well have chuckled over Mr Wood´s discomfiture as his new boss James Wolfensohn, President of the Bank, overrode his suggestions and cancelled plans to pay for the dam. Within Nepal, the Arun cancellation was a debacle for the Bank, and today it finds itself in the periphery of power sector discussions. However, the potential impact goes far beyond Nepal´s borders, for the success of the anti-Arun activists proved to activists all over that it was possible for local groups armed with information and commitment, to challenge the Bank and force its hand.
Earlier, activists who opposed the mammoth three-billion dollar Sardar Sarovar Project over the Narmada river in India had also been successful in forcing the bank to review its impact and cancel financial support.
Because of its ability to influence the course of societies, before Narmada and Arun III, there was a belief that it was impossible to question what the Bank did. The cancelling of support for the two projects showed the Bank´s inability to defend schemes of which it had been a vehement supporter. It turned out that the moment knowledgeable activists put on the heat, the Bank´s defences collapsed. From the two instances, activists have got an idea that the Bank, after all, is not invincible. It can be right, but it can also be wrong, in which case it should be brought to task.
Unfortunately, the lessons from the two episodes are not being learnt by the governments of South Asia. The Indian government has decided to go through with the Narmada project despite the withdrawal of support by the Bank, blaming activists for blocking ´development´ and ´progress´. And, the Nepali government regards Arun as a national disaster that was brought about by unprincipled ´environmentalists´. Their arguments made for national capability building and against the top-down method of development that Arun exemplified are regarded as mere sophistry. Elsewhere, in India and Nepal, as in the rest of South Asia, it is business as usual as far as the donor banks and recipient governments are concerned.
Development as Usual
While the two episodes might be seen as a setback for the Bank as far as the highly-visible dam projects are concerned, its influence in other spheres continues unabated, from education to sanitation, highway projects to coal-powered power plants.
The big development projects like dams are not the only thing that the Bank lends money for. No, Mr Wood has far more clout than that. He gets to dictate the terms and conditions of national budgets although in recent years the Bank has sought to downplay this aspect of its work after Bharat Bhusan, a journalist with the Indian Express, revealed that officials in Washington were given drafts of the Indian government budget proposals even before they were presented to the Indian Parliament.
Perhaps the most dangerous instrument that the Bank has ever had at its disposal is something called "structural adjustment programmes" (SAPs) which are essentially loans to the general coffers of the government in return for very strict changes in the government budget such as cuts in health and education expenditure and privatisation of national agencies like the electricity and telephone companies. The Bank´s logic is that the government should not subsidise sectors that can pay for themselves and turn a profit. Unfortunately, most of these industries are often snapped up by foreign multinationals who see no reason to provide services to the poor for the simple reason that they cannot afford to pay for the cost of providing these services to remote areas.
It is not that macro-economic figures have not improved as a result of SAPs. Bangladesh, which embarked on the path of liberalisation in the early 1990s, saw its exports surge by more than 25 percent in the first half of 1994-95 over the same period in the preceding year. Its Gross Domestic Product (GDP) rose by 5 percent, up from 3.4 percent in 1990-91. Industrial growth was estimated at 10 percent against 4.5 percent five years before.
However, critics say that, as is the case all over South Asia, economic liberalisation of the kind promoted by the Bank has only helped Bangladesh´s rich and not the two-thirds of the 120 million population which lives below the poverty line. Worse, hundreds of textile mills, battery manufacturers, ceramic units, small machinery and spares making concerns are having to pull down shutters in the face of competition from foreign manufacturers. According to economist Anu Mahmood, some 3.5 million Bangladeshi textile workers could lose their jobs if effective steps are not taken to check imports of foreign goods allowed by the liberalised policies.
The Pakistani government´s privatisation policies have already laid off tens of thousands of workers. More than 60,000 workers were eased out when the previous Nawaz Sharif government sold 69 state-owned industrial and commercial units to private purchasers. Privatisation plans of the present Benazir Bhutto administration threaten to axe another 240,000 jobs in the power, railways, telecommunications, energy and transport sectors.
Even Nepal, with its very tiny industrial sector, has not been spared. A study found that nearly half of the about 2,400 workers employed by the 10 state enterprises privatised since 1992, have lost their jobs. In countries like India where the public sector, particularly services, is the largest employer of women, (11 percent of all jobs are held by women) closure and privatisation are already pushing large numbers of working women to labour under dismal conditions in the unorganised sector.
The Region´s Health
The International Labour Organisation, in a study published this April, points out that SAPs simply aggravate poverty and inequality of incomes rather than the intended opposite. That, in turn, rebounds to the detriment of education, with less favoured economic groups withdrawing their chil¬dren from the school system, especially secondary institutions.
In Bangladesh, experts blame the Bank´s SAPs for the sharp drop in agricultural growth rates from 5 percent in 1989-90 to 0.2 percent at present, even though 80 percent of the country´s population toil on the land. According to Bangladesh farm expert M. A. Sattar, the government´s withdrawal of subsidies from the agricultural sector—under SAPs—is directly responsible for the decline in farm yields.
SAPs have also been blamed for the recent declines in healthcare. Last September, the regional office of the World Health Organisation (WHO), based in New Delhi, voiced concern in a report entitled Alternative Financing of Health Care. The diminishing expenditure on basic health care in South Asia—one percent or less of the GNP of the regional countries—was "more notable in those countries undergoing political and economic reforms," it stated.
Dr Prabir Chatterjee, a doctor in a tribal area of Bihar, complains that the Bank has its priorities distorted when it urges governments to privatise basic health services. India´s health priorities are being set by international organisations like the World Bank, he says. "They lend us money to use to buy AIDS testing kits made by foreign companies but there is no money to buy medicines that can be made in India for diseases like malaria which kill tens of thou¬sands of people."
Elsewhere in South Asia, too, experts feel that the Bank has taken its AIDS prevention work too far. Last July, the Bank told Bangladesh that the number of tuberculosis cases related to HIV infection (the virus that causes AIDS) will hit 12,000 by the end of this century, a figure that the health ministry rejected as "absolutely bogus, baseless and unfounded."
Elsewhere, Bank projects are said to be the source of health problems. In the state of Orissa, experts found an astonishing 67 percent of men and 64 percent of women near a Bank-financed coal-fired power plant suffering from fluorosis, a bone-weakening disease. And now, the Bank´s private sector affiliate, the International Finance Corporation, proposes to place India´s biggest steel mill with its own sizeable coal-fired power plant in the tribal Ganjam District, where infant mortality rates are already among the highest in the world In the Singrauli region of central India, Bank-financed coal mines and power plants have displaced some 150,000 people, some as many as five times over in the last two decades.
This May, the Bank lent Orissa another USD 350 million to facilitate power expansion in the state. Although the Bank has also just approved a USD 63 million loan for social programmes and environmental rehabilitation for people affected by power projects and mines, it now plans to give India another USD 500 million to expand 25 coalmines. Billions more are expected to pay for expansion of coal-fired power plants in coming years.
These activities make activists see red. "The loss of natural resources, loss of occupation for thousands of fishermen and farmers, the miseries due to health hazards and displacement far outweigh the development that coal-fired power in Orissa is ushering in," says Sisir Tripathy, coordinator of the District Action Group (DAG), a group of 21 non-governmental organisations in the heavily industrialised Talcher-Angul region of Orissa.
But these expansions are inevitable, says Paul Mitchell, a spokesman for the South Asia department of the Bank. "In general, there is no getting away from coal being mined in India and used for power generation, given that coal, with reserves of about 250 years, is the least cost source of energy for most uses in the country. So the question is to use the resource most efficiently and with the least negative impacts," he says.
Does the World Bank ever admit that its grand economic policies and mega-projects sometimes fail? Only sometimes, and with reluctance. Projects funded by the Bank in South Asia are assessed on the basis of the Bank´s operational directives and policies by the Bank´s own staff who generally work in one of the two country departments that Wood runs (see Pg 28 for current list of division chiefs and department directors) The country department staff work closely with several other specialist departments such as the Asia Technical department which oversees matters like engineering and the Environmentally Sustainable Development department which offers advice on environmental matters. These departments do not often see eye to eye and it is not uncommon for country department staff to hire outside consultants in order to avoid negative evaluations from staff environmentalists. Outside consultants rarely ever give negative evaluations for fear of losing work in the future.
Once a favourable project report has been prepared and approved by the board, the only way to stop work from going ahead is by appealing to the newly created Inspection Panel. This body, which was set up in the autumn of 1994, was instrumental in stopping the Arun III project. But it is disliked intensely by the Bank management, which takes every opportunity to hamstring its work. Finally, even after a project is finished, there is one department that can still take the Bank to task for mistakes made during the execution of the project. This is the Operations Evaluation Department(OED), which can review completed projects, although its recommendations are not binding on the Bank.
The OED recently did a negative evaluation of the Mahaweli dam scheme in Sri Lanka, a project in which it played a prominent advisory role. The evaluation report stated that "incomes were much lower than expected" at the project appraisal stage. However, said the report, "the project turned out to be unsatisfactory in economic terms, less because of poor design, or poor implementation, but because the terms of trade shifted against rice production."
The Loan Process
It is one thing for the Bank to do an ex-post facto evaluation and quite another for activists to question the rosy claim made in an appraisal report before a project is commissioned—which was what the Nepali activists did in the case of Arun III. Indeed, questioning the Bank´s experts or challenging it is no easy task. What the Arun case indicated is that those who would challenge the Bank must have authentic information in their hands and be able to skilfully use various points of support to counteract the Bank´s own traditional bases of support (most important of all, the governments themselves).
Even if a person who is troubled by a new Bank project in the Subcontinent decided to pick up a telephone to dial Wood´s office or tried to send him a fax or an email, the chances of getting a personal reply are rather low. As with all bureaucracies, the tendency is to ignore the petitioner unless he makes such a compelling case and so much noise that it is impossible to ignore.
The very first step before going public, then, is to get detailed information about the project and the Bank´s decision-making process itself.
Projects like the Arun dam often first see the light of day at regular country-specific "donor" meetings that are typically held at the Paris offices of the Bank (sometimes the meetings are held elsewhere just as India´s meeting will be held in Tokyo this year). Large borrowers like India are granted these special audiences with the Bank every year, while smaller borrowers like Bhutan may have to wait for other opportunities to meet individual Bank officials to propose new projects.
One such forum is the Bank´s own annual meetings which take place at its Washington headquarters every autumn and are attended by finance ministers of almost every country in the world. (This meeting is held outside the city once every three years such as the one in Madrid in 1994 and the upcoming one in Hong Kong in 1997.)
Unfortunately none of these discussions are ever made public, so the activist might prefer to take the next best route to find out about proposed new projects, which is to subscribe to a monthly Bank publication called the Monthly Operations Summary, which lists all the projects in the world that the Bank agrees to study for possible funding. Theoretically, one should also be able to get such information from local finance ministries but in practice that might be a little more difficult.
Technology permitting, slightly more detailed information on all projects that are close to approval can also be immediately obtained via an electronic search of the World Bank´s computer site on the World Wide Web (http://www.worldbank.org/html/pc/PIDs /html) where a page-long summary of proposed projects can be found (this is known as the Project Information Document) together with a summary environmental impact statement (known as Environmental Data Sheets). The Bank also often makes available paper copies of an Environmental Impact Assessment (EIA) of the project if the borrower government issues permission. Most of these documents are available at the Public Information Centre of the World Bank in Washington and should also be available at the local offices of the World Bank in national capital cities (see the end of the article for phone and fax numbers of these offices).
Do people affected by the project go to these offices to look up these documents? The answer is no because most of the affected people are too poor to travel to such places. Instead the Bank recently discovered that these offices are mostly frequented by the people who hope to make money out of the projects, i.e. engineering consultants and building contractors. These groups bid against each other to help Bank staff prepare more confidential Staff Appraisal Reports (SARs) on each project before it gets taken to the Bank´s board of executive directors for a final funding decision.
Executive board meetings are conducted every Tuesday and Thursday at the Washington headquarters. Once a project is approved by the board of directors, it is almost too late to stop it from going ahead. All countries are represented through one or the other of the 24 executive directors but the voting power of each official depends on the dollar contributions made by the countries he or she represents. Thus Abdul Karim Lodhi, the director representing Afghanistan has no power for all intents and purposes, while Jan Piercy, the executive director who represents the United States, controls almost a fifth of the votes on the board.
Consultants for the Bank
Wealthy countries, like the US, often make all of the project documents (including the SARs) directly available to contractors and consultants. In the US for example, there is a library in the Department of Commerce where anybody can borrow reports overnight. Often reports arrive before they are approved in contravention of the Bank´s own guidelines. In every state capital in this country, there is an office to assist potential contractors and in embassies such as in Jakarta, Indonesia, lists of projects in the country for which external finance is available, are provided and updated regularly.
Regular perusal of such reports can give consultants and companies advantages in winning contracts. Borrowers also have to advertise internationally for all projects over a certain amount to establish a competitive bidding process. All projects are also advertised through Development Business, a bulletin published by the United Nations, within two weeks of approval of the board of directors. Subscribers to this publication, which costs USD 500 a year, are a lucky lot: one advertisement for it claims that one in three subscribers wins a contract from the Bank. Better still they offer an electronic service that allows companies to access the information as soon as it is approved. This service costs over twice as much.
The consultants who the Bank hires make a quick three-week trip to the site for fees that can range up to USD 10,000 a month per head. Technically, companies from any country can win contracts but in practice it is the wealthy countries that profit the most. A United States Treasury study of the number of contracts won by US companies, shows that US companies won USD 2.7 billion in contracts in 1993 for the USD 1.5 billion that the government contracted to the multilateral banks. The authors of the Treasury study say that the estimates are crude and represent perhaps 40 percent of the real amount because not all contracts are identified by country of origin, especially if they are below a certain amount.
Contractors who have been big winners in recent years include (for amounts above USD 50 million) Newmont Mining of Colorado, General Motors of Michigan, McDermott of Louisiana, Caterpillar ol Illinois, Ameritech of Illinois, Coca-Cola of Georgia, General Electric, and Chevron Chemicals of California. Other big winners include Time-Warner of California, 3M, BankersTrust,Cargill,Dupont, Exxon, Ford, Harvard University, Monsanto, Mack Trucks and Union Carbide.
The work that many of these consultants and contractors do is often shoddy. World Bank statistics collected in 1993 by Willi Wapenhans, a former World Bank vice-president, showed that 37.5 percent of Bank projects were failures on economic grounds alone, let alone on environmental or social grounds. Patrick McCully, of the California-based International Rivers Network, says that one recent example of poor quality work was a study conducted for the Bank by a UK-based company called Environmental Resources Management (ERM), which travelled to the Narmada Valley in India in March 1993 to examine the impact of the Sardar Sarovar dam project.
The Bank was told by the ERM team about the marvellous "public health benefits," "opportunities for environmental improvement provided" by the project with "no major work outstanding (for) afforestation" which was carried out "in accordance with the wishes of the oustees." Yet, the team spent most of their time at an office hundreds of miles away, had visited the dam site once and never bothered to visit the resettlement sites.
One member of the team claimed that when she visited the site, she had not seen any trees, and concluded that the environmental impact of the dam would be minimal. "They went there in March, well into the dry season when the deciduous trees of the area have lost their leaves," says McCully, adding, "Consultants like these are just prostitutes who take their clients´ money and do what they know that the client will like. They have no professional accountability to anyone other than their paymasters." Likewise, McCully says the consultants´ acceptance of government claims of adequate plans for resettlement was naive.
Proposed New Loans
Does its long list of failures, its collaboration with often questionably-motivated governments, its poor quality of contractor-consultants, deter the Bank from pushing more and more projects on South Asia? Hardly, it would seem. Today, the Bank has plans for big new loans to South Asia. The latest Monthly Operation Summary lists some USD 220 million in proposed new loans to Nepal (that is to say, another USD 220 million in new debts in a couple of years unless these project generate some income, which is unlikely given the Bank´s track record to date), USD 450 million in proposed new loans to Sri Lanka, USD 1.3 billion in proposed new loans to Bangladesh, USD 1.4 billion in proposed new loans to Pakistan, and a staggering USD 6.5 billion in proposed new loans to India.
In Big Brother's Footsteps
THE ASIAN Development Bank (ADB) is known as the "Japanese" bank, and largely follows the footsteps of its big brother, the World Bank.
Like the World Bank, the ADB says it has turned a new green leaf to make itself more nature-friendly and people-friendly by giving local communities the opportunity to voice opposition to projects deemed undesirable.
In response to criticism from international activist groups, the adb has followed the World Bank in putting into place greater transparency in project planning and the setting up of "inspection panels". The bank is also moving away from its traditional domain—big infrastructure projects that critics said ultimately benefited only Japanese contractors and car exporters—to social welfare sectors like education and basic health.
The Bank says it has achieved its target of having half of its projects in the social and environment sectors. It claims that 40 percent of its loan column is given over to these "soft" sectors. Says ADB vice-president Peter Sullivan: "We started out as an infrastructure bank, which concentrated on things like irrigation and power. Now we´re looking at environmental issues, women´s issues, maternal and child health care and micro-credit."
Critics, however, are not satisfied and would like to study the criteria the bank uses to classify "social projects". They have banded together into a regional campaign to reform ADB´s lending policies, and maintain that although there is a welcome change in the "commitment level" at the ADB, it is still business as usual in many areas of implementation.
"Compared to the World Bank, the ADB is more cautious, discreet and operates more on consensus," says Antonio Quizon of the Asian ngo Coalition for Agrarian Reform and Rural Development. But despite the new disclosure policy, he says the Bank is not fully transparent about project information.
Bank sources say they are drawing up a list of "outside experts" to comprise panels that the board of directors can appoint to discuss complaints by activists and affected residents from project sites. These independent panels would be able to present "reasonable evidence" relating to projects that they believe violate the Bank´s own standards.
South Asian activists who met with their regional counterparts recently in Manila, where the ADB is headquartered, say that they too are not satisfied that the ADB is completely transparent about projects that it intends to be involved in. Activists in Gujarat say that despite denials from Manila, a huge loan provided by the Bank to India for new energy projects will go partially to build the USD 3 billion Sardar Sarovar dam on the Narmada River. This was the project that the World Bank pulled out of three years ago.