Tag Archives: World Bank

US food aid revolution: rumour or reality?

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On 27 February, 11 humanitarian organisations released a joint statement welcoming the Obama administration’s proposal for US food aid reform, which recommends a shift to local and regional procurement of US food assistance.

According to the Center for Global Development, the “proposal would restructure funding for PL480 – more commonly known as food for peace – and shift some or all of the food aid budget to cash that could be used flexibly to provide assistance in ways that reduce costs and speed the delivery of food aid”.

The joint statement focuses on two aspects of the US food aid programme:

  • reliance on ‘in-kind’ food and shipments from US suppliers, where food is directly delivered to developing countries;
  • monetisation, where aid agencies are forced to sell off US food in developing country markets to finance development projects.

The statement stresses the importance of using local and regional procurement as part of the food aid toolbox, as well as the inefficiency of the monetisation procedure. This position is in line with Eurodad research, which assesses the boomerang effect of aid – that sees the majority of money coming back to donors rather than reaching developing countries. Purchasing from firms from donor countries is the least effective form of procurement. It deprives developing countries of receiving the full potential of aid as a driver for long-term development projects and undermines the recipient countries’ ownership of the development process.

The independent evaluation report of the US Department of Agriculture’s local and regional food aid procurement pilot project highlights the fact that “local and regional procurement is a triple win: providing considerable cost savings, faster humanitarian response, and support for the local farmers and agricultural markets that are the key to providing long-term global food security”. In line with this, recent Eurodad research notes that, when procurement is locally sourced through country procurement systems, aid can have a double dividend – contributing to the development of smallholder farms and to the eradication of poverty. Smart procurement can improve access to markets, increase cooperation among farmers, diversify and improve the quality of crops, protect producers from external and unpredictable shocks, help farmers to access finance and invest in their land. Moreover, it can contribute to increasing people’s purchasing power, for instance by creating jobs and improving living standards.

This research also points out that the US is one of the world’s largest providers of global food aid, accounting for 60%, together with Japan. US food aid is still tied aid, relying on ‘in kind’ food and shipments from US suppliers. The US uses its programme as ‘corporate welfare’ for its agribusiness companies, undermining local farmers in developing countries and reducing food aid effectiveness. Eurodad has highlighted that less than 2% of US aid to Haiti supports local firms and pointed out how aid can have a double dividend if locally sourced.

The US is not the only black sheep. Despite international commitments, donors continue to tie their aid formally or informally. Eurodad research shows that two thirds of contracts awarded by bilateral donors still go to firms from Organisation for Economic Co-operation Development (OECD) countries and donors continue to have a strong influence on designing procurement reforms, undermining the opportunities for local firms to win contracts.

Changes in the international mindset are already underway. The World Bank and the EU are currently reviewing their procurement policies and civil society groups are pushing forward the issues of domestic preferences and the use of developing countries’ procurement systems. These changes are critical to achieving concrete reforms that promote aid effectiveness and local economic development. 

World Bank must decide if it stands for development or business as usual.

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World Bank must decide if it stands for development or business as usual.

The first round of consultations for the World Banks review of its procurement policy has been completed and an analysis of the inputs provided has been posted. The consultation featured a wide array of stakeholders including civil society. Clear areas of contention between donor countries, developing countries, and their private sector have arisen in the process on issues of domestic preferences and the use of developing countries’ procurement systems. The Bank has to decide whether it stands on the side of development and developing countries, or whether it stands for market orthodoxy and “business as usual.”

Domestic preferences or market liberalisation?

As Eurodad has pointed out through its public engagements and through its ongoing research and analysis, procurement is of critical importance in determining both the quality of aid and its potential development impact. Eurodad, and others, have argued that developing countries need the space to use procurement as a strategic tool in implementing development strategies and industrial policy, as well as boosting the local economy through the double dividend offered by smart procurement.

Trade Unions, developing countries and their firms have for the most part echoed this argument throughout the consultation, calling for “more support for the local industry, including domestic preferences.” Key areas of concern for them were the ability of small and medium sized enterprises (SMEs) to effectively compete for contracts which often were not even written in the local language, and the inability to compete for large scale infrastructure projects where the capacity did not yet exist.  Building and Woodworkers International (BWI) noted:

“The Bank is an agent of market orthodoxy and trade liberalisation, and there are some who regard domestic preferencing as pernicious. It is the view of the BWI that it is a legitimate policy of governments to help local industry and to boost employment. Provided these are declared policy goals of government, and there is transparency on the percentage weighting in favour of local firms/ SMEs when adjudicating contracts, then domestic preferencing is a good mechanism.”

This call ran counter to that of donors and multinational corporations which argued for an end to domestic preferences, for continued liberalisation of government procurement and international competitive bidding.  

Using country or donor systems?

Use of country procurement systems has proven to be one of the more contentious items discussed during the consultation. For the most part developing countries and their domestic private sector encouraged the use of country procurement systems as the default option. They argued that managing multiple donor procurement systems with already limited capacity could be overwhelming. They further argued that “The insistence to use Bank procurement procedures hinders growth of country systems.” CSOs pointed out that use of country systems as the default is in line with international commitments on aid effectiveness and should be reflected in World Bank procurement policy.

On the other side of the discussion were donors and the private sector representatives from donor countries who argued that increased use of country systems exposed the World Bank to greater risk from fraud and corruption. Multinational companies also argued that dealing with fewer systems was easier than going through each countries procurement systems. These concerns were also echoed by a small group of participants from partner countries.  

What both camps could agree on is that if use of country systems is to be mainstreamed within World Bank procurement policy it should be accompanied with sufficient support to ensure that these country systems are accountable, functional, and effective for development.

Expectations from the World Bank’s management

Management’s response should attempt to reconcile these key areas of contention and must explicitly determine whether the World Bank represents the interests of donors and multinational companies, or of developing countries and their domestic private sector.

As noted by Civil Society, if the Bank wishes to demonstrate its commitment to development management should:

  • Support the use of domestic preferences.
  • Live up to the Banks international commitments and use country procurement systems as the default option.
  • Support developing countries in building transparent end effective country procurement systems.
  • Not undermine the policy space that developing countries need to implement their development strategies and industrial policies.
  • Support calls from civil society organisations to initiate an independent review assessing barriers and how to effectively support SMEs. 

Smart procurement for food security

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Eurodad  has produced a new briefing on smart procurement and food security.

Procurement is an important share of economic activity in any country. In most developing countries, public procurement is either the main or second area of government expenditure, often with considerable finance from Official Development Assistance (ODA).

Smart procurement can make a major contribution to the eradication of hunger and poverty in several ways. Local and regional procurement can support the development of the domestic economy, such as in the agricultural sector. Smallholder farmers, mainly women, can benefit from new opportunities by creating new markets and raising incomes. Moreover, the use of country procurement systems increases ownership and domestic accountability in recipient countries. Open and efficient public procurement practices can contribute towards the sound management of public expenditure and poverty reduction through delivery of public services in health, education and infrastructure.

In the last decade, the international community has committed to ensuring aid effectiveness, by untying aid and using recipient countries’ procurement systems as the first option. Despite this, donors keep tying their aid and influencing developing countries’ government policies. Eurodad research shows that two thirds of contracts awarded by bilateral donors still go to firms from Organisation for Economic Co-operation Development (OECD) countries.

Some initiatives have already arisen in support of local procurement, such as the World Food Programme’s Purchase for Progress. Brazil and India have also launched their own national food purchase programmes and are sharing the expertise and lessons learned.

Food advocates and campaigners have an opportunity to put smart procurement at the top of the international agenda. Donors should stop thinking of aid, especially food aid, as another channel to export agricultural surpluses and consider its purpose in helping developing countries to be independent and to provide for their own people.

Read the full briefing: Smart procurement for food security

Domestic resource mobilisation in developing countries – interesting graphs

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by Jesse Griffiths

I’m in the middle of updating Eurodad’s summary of financial inflows and outflows to developing countries – watch this space – but thought I’d share some really interesting graphs.

Here’s the first, which I put together from the World Bank’s online database. It shows “Gross capital formation” – which used to have the more straightforward title of “Gross domestic investment” – as a share of GDP. It shows just how successful developing countries have become in mobilising resources for investment, even despite the global economic crisis. Impressive stuff, isn’t it?

Gross capital formation by income group (% GDP)

This measure is a mix of many different things.  It includes private and public investment,which could be funded by earnings or borrowing.  It also includes some foreign direct investment, but this is a small proportion of the total (though it may be large for some countries.) Overall, though it shows that developing countries are managing to stabilise, and in many cases increase investment, despite global economic problems.

Note also how the global average has slumped since 2008 – dragged down by the poor performance of rich countries. Which kinda makes me wonder why the World Bank’s Doing Business Report keeps ranking rich countries as the best places in the world to do business… Let’s hope they ditch their unscientific and unhelpful ranking system in the current review.

The story for public sector revenue is similar but nowhere near as impressive.

Government revenue (excluding grants) by income group (% GDP)

Source: IMF, “Revenue Mobilization in Developing Countries”, 2011, p12

Overall, since 2000, developing countries have begun to mobilise an increasing share of GDP as public sector revenue, though far less than rich countries.

Now imagine what they could do if the world got serious about stopping the hundreds of billions lost each year by developing countries in illicit outflows, and clamping down on global tax dodging by multinationals ….

Committee on World Food Security takes step towards pro-poor procurement

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by Francesca Giubilo

The 39th session of the Committee on World Food Security (CFS) drew to a close on 20 October. Its final report endorsed some interesting recommendations, including a clear message to support local purchases. Recognising the relevance of local procurement for food security may hint at a positive change in mindset for the years ahead.

Based on the High Level Panel of Experts’ report on social protection and food security, the CFS – the most inclusive international and intergovernmental platform for all stakeholders working on food security and nutrition – recommends that Member States and international organisations should launch programmes aimed at supporting “agricultural livelihoods and productivity for the poor”. In an exhaustive list that includes “production input support” and “agricultural livelihood packages and extension services”, there is a strong message on procurement, supporting “home-grown school feeding that purchases food from local smallholder farmers”. In line with recent Eurodad research, buying locally is recognised as an important way of developing domestic resources and eradicating hunger.

Over the years, pro-poor procurement has come back onto the international agenda, including at the High Level Forum on Aid Effectiveness and the recent Rio+20 meeting. Research conducted by Eurodad highlights how sustainable and public procurement can generate income, reduce costs and support the transfer of skills and technology. Local procurement allows aid monies to have a double dividend and to support domestic enterprises. It helps smallholder farmers to access markets, as well as strengthening farmers’ organisations. Moreover, through the use of country procurement systems, developing countries’ governments can increase their accountability and ownership, which allows them to launch social programmes efficiently and to provide for their own people.

However, the CFS also includes another element in the list above: the “in-kind transfers”, which is problematic. At present, some countries abuse this food delivery system to raise the incomes of their own agribusiness companies, instead of boosting domestic resources. Strong positions must be taken against this form of food assistance. Eurodad has been fighting for smart procurement and untying aid for a long time. For instance, with the support of partner organisations, we are currently calling on the World Bank to review its procurement policies and to promote pro-poor procurement guidelines.

The CFS recommendations are a small step forward in this struggle. Nothing will happen overnight, but now is the time to make faster progress and to convert this positive change in the international mindset towards something concrete.

IMF/World Bank Annual Meetings: arguments and inaction

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IMF recognition that it has dramatically underestimated the impacts of austerity policies strengthened calls for reform of IMF conditionality, and the World Bank’s jobs report undermined its own Doing Business rankings, but the IMF/World Bank annual meetings ended this weekend with little concrete agreed. Meanwhile, the meetings witnessed a reinvigorated campaign by civil society organisations, supported by some governments, and echoed by the United Nations, to develop fair and transparent debt workout mechanisms.

IMF austerity mistakes add to calls for conditionality reform

Media coverage at the recently concluded World Bank and IMF annual meetings in Tokyo focused on a spat between Germany and the IMF, when the IMF issued a mea culpa recognition that it – and governments around the world – have been dramatically underestimating the negative effects of austerity policies.  The IMF’s World Economic Outlook estimated that forecasts for the multiplier effects of austerity cuts and stimulus packages have been dramatically too low – meaning austerity has hurt growth far more than expected.  Here is the report’s summary (from page 41):

“The main finding, based on data for 28 economies, is that the multipliers used in generating growth forecasts have been systematically too low since the start of the Great Recession, by 0.4 to 1.2, depending on the forecast source and the specifics of the estimation approach. Informal evidence suggests that the multipliers implicitly used to generate these forecasts are about 0.5. So actual multipliers may be higher, in the range of 0.9 to 1.7.”

This is an extraordinary admission by the IMF and will add to growing calls for the Fund to radically alter the conditionalities it attaches to its loans, which consistently promote austerity.

However, the official communiqués contained no mention of this, nor did they highlight the recently concluded review of IMF conditionality.  The review, while containing a few useful recommendations was limited in scope and did not examine IMF loans to Europe – the vast majority of IMF lending, leading analysts to question its relevance.  The higher level of conditionality attached to European loans creates real concern that the slow but important trend towards less conditionality at the IMF may be reversed.  The region that is likely to be in the forefront of battles to remove damaging IMF conditionality is the Middle East and North Africa, with Egypt close to agreeing a $4.8 billion IMF loan. With the IMF also announcing that it would use its windfall profits from selling its gold to boost lending to low-income countries, we can expect conditionality to be a major issue across the world as the IMF continues to expand its lending.

Going out of Doing Business?

The release of the World Bank’s 2013 World Development Report on jobs, has strengthened campaigns against the World Bank’s controversial Doing Business rankings.

As trade unions pointed out, the WDR’s review of the literature debunks the idea, propagated by the rankings, that deregulating labour markets to make it easier to fire workers is always a good idea. Though the Bank suspended the Doing Business indicator on employing workers in 2008, unions point out that “it continues to collect the raw data for calculating the indicator and the Doing Business team has not hidden its desire to reincorporate it.” The World Bank is currently reviewing Doing Business, and this will add force to the campaign by many civil society organisations, supported by Eurodad, to discontinue the rankings.

Calls for fair debt workout mechanisms

While the official meetings dawdled to their limited conclusions, there was a reinvigorated push by civil society organisations and the United Nations to put the need for fair and transparent debt workout mechanisms back on the political agenda.  An international coalition of civil society organisations, including Eurodad, issued a statement calling for “a lasting solution to the sovereign debt crisis and the establishment of a fair and independent international debt workout mechanism” and made concrete proposals.  A high level panel in Tokyo saw Ministers from Norway and Argentina echo these calls, and the United Nations (UNDESA) weighed in with its own high level panel on timely debt resolution. This renewed push to stop the chaotic, lengthy, unfair and damaging way debts – of both developed and developing countries – are currently dealt with builds on the recent announcement by the Norwegian government that it will be auditing all its debts to see which are illegitimate.

Other issues: capital controls and private finance ‘innovation’

Meanwhile, the IMFC communiqué notes that “the potential impact from large and volatile cross-border capital flows should be closely monitored” but says nothing about the IMF’s upcoming ‘institutional view’ on capital controls. Critics fear that the Fund’s slow acceptance of the need for governments to regulate finance flowing in and out of their countries will continue to emphasise problems rather than potential for these techniques to benefit stability and development.  Nor does the communiqué mention the continued scandal of huge illicit financial flows that aid tax evasion on a massive scale, an issue Eurodad has campaigned on for a long time.

Finally, while the development committee communiqué says that “the private sector generates most jobs, but the public sector also has an important role to play” it goes on to emphasise importance of “innovative initiatives” by the World Bank’s private sector arms. Eurodad research has highlighted significant problems with the Bank’s approach, finding, for example that the Bank’s private sector lending has focused on supporting firms from rich countries and is often routed through tax havens

 

Campaigners in Toyko call for end of harmful tax policies

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Tokyo, Japan, October 12, 2012

As the IMF and World Bank pursue implementation of tax policies in developing countries, members of Civil Society worry that these powerful institutions are putting the interests of international investors above those of the democratic governments of developing countries.

Of particular concern is the World Bank’s influential “Doing Business” ranking which many development experts find particularly damaging.

“The rankings are based upon criteria that might boost the bottom line of foreign investors but often damage national fiscal policies and hamper efforts to increase domestic resources through taxation”, said Øygunn Sundsbø Brynildsen, Senior Policy Analyst at the European Network on Debt and Development (EURODAD).

“The World Bank’s ‘Doing Business’ ranking pushes countries to lower taxes on corporations, reduce funds for vital public investment in health and education and often forces them to seek revenue elsewhere. It has caused more harm than good and we hope the Bank’s ongoing review of the rankings will result in their discontinuation” Brynildsen added.

Although generally encouraged by the IMF’s growing recognition of the equity effects of tax policies, campaigners in Tokyo expressed dissatisfaction that Value Added Tax (VAT) continues to be seen as a main source of tax revenues. “We are surprised that both the World Bank and the IMF continue to push VAT despite its clearly regressive nature,” said Pooja Rangaprasad of India’s Centre for Budget and Governance Accountability. “Ultimately, it is impossible to dispute the fact that VAT is a heavy tax burden on the poor.

A further issue of concern to tax campaigners is the continued practice by the World Bank’s International Finance Corporation (IFC) of channeling its investments through secrecy jurisdictions. “Tax havens are being used to rob developing countries of much needed tax revenue by facilitating tax dodging. Development finance institutions like the IFC should be the first to discontinue the practice”, said Brynildsen.

Tax revenue for developing countries is a crucial source of independently generated income and as such campaigners feel its importance cannot be exaggerated. Given their influential role in forming national and international fiscal policies, campaigners believe it would be very counterproductive to its development mandate if the World Bank and IMF were unable to stop pushing tax policies that hinder efforts by developing countries to increase local economies and establish greater financial independence.

Contact:
Pooja Rangaprasad, (currently in Tokyo, Japan)
Centre for Budget and Governance Accountability (CBGA), India, member of the Task Force on Financial Integrity and Economic Development
rpooja@cbgaindia.org +81 807 008 1838

Øygunn Sundsbø Brynildsen, (currently in Tokyo, Japan)
European Network on Debt and Development (EURODAD), member of the Task Force on Financial Integrity and Economic Development
obrynildsen@eurodad.org +32 486 903 491

Dietlind Lerner (United States)
Communications Director, Task Force on Financial Integrity and Economic Development
dlerner@financialtaskforce.org +1 202 577 3455

Bias to report: World Bank releases new Global Financial Development tome

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By Jesse Griffiths

Normally, I enjoy reading flagship annual reports from august international institutions; they can provide useful overviews and normally have one or two nuggets. The World Bank’s new Global Financial Development Report 2013, however, left me hoping they don’t issue any more of these.

Not just because we already have enough flagships – even for a report junky like me.  It’s worth quoting from the comprehensive study of World Bank research undertaken by a team of (self-styled) ‘academic superstars’ led by Princeton Professor Angus Deaton:

“The large number of flagship reports makes it virtually impossible for [World Bank] management to exert sufficient quality control precisely where it is most needed.”

“We believe that the Bank produces too many of these reports.”

(Side note: This was released in 2006 – and the evaluators complained that it had been seven long years since the previous evaluation – surely it’s time for an update?)

No, what really left me tearing my hair out were too many attempts to draw one-sided conclusions about the highly contested issue of the role of the state in finance.

Here’s an obvious example that others have highlighted.  The report finds that:

 “Lending by state-owned banks is less procyclical than lending by private banks, and some state banks played a countercyclical role during the global financial crisis”

This is an interesting finding, but clearly one the authors feel uncomfortable with [though they all work for a state-owned Bank themselves, of course].  So they do some interesting contortions – highlighting past poor performance of state banks as the reason their role should not be emphasised:

“…the track record of state banks in credit allocation remains generally unimpressive, undermining the benefits of using state banks as a countercyclical tool.”

It seems to me that private banks have had a pretty disastrous recent track record in credit allocation, and have behaved in an incredibly procyclical manner, so we should be far more interested in this finding that the report authors are. Previous Eurodad research has highlighted how the rapid growth in lending by development finance insitutions, including the World Bank’s International Finance Corporation, was in part justified by the need to step in when private credit dried up. Surely a better conclusion to draw is that we need to urgently study the successful state banks, and see what can be learned?

This is just one example. There are plenty of others, leading some to be far less charitable about the report: University of London banking expert, Paulo Dos Santos called it a “rearguard action seeking to defend old policy shibboleths”. Perhaps it’s time for another group of academic superstars to do a thorough evaluation of this report…

NGOs meet at the 20th EuroIFInet meeting to prepare for the World Bank and IMF Annual Meetings.

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By Carlos Villota,

Last week the European network of IFI (International Financial Institution) watchers – the EuroIFInet – met in Amsterdam for its 20th Annual Meeting to strategically review its last 10 years of activism. In addition the network coordinated NGO actions for the Annual Meetings of the World Bank and the IMF, which this time are taking place in Tokyo from 9 to 14 of October.

This year, BothENDS together with Eurodad hosted the meeting for this informal but active network of European NGOs. Non-European allies such us PSPD (Korea), Forest Peoples, Afrodad and World Resource Institute also attended the meeting and were key assets during the different sessions.

The role of non-traditional donors, emerging economies and the diminishing power of European countries were discussed. In addition, issues such as the World Bank Program for Results financing instrument the ongoing Safeguards review, Investment Lending Reform, IMF gold sales, IMF quota reform, Energy policies and the World Bank Doing Business Report were also addressed.

Through exchanging ideas and advocacy strategies, the participants stressed the need of reinforcing alliances with emerging countries in order to achieve more effective common advocacy towards IFIs. The increasing role of private finance and the growing linkages between private sector actors and the IFIs, was highlighted as a key crosscutting issue in order to get engaged in new emerging world dynamics and advocate to fight poverty and inequality.

The issues addressed will be amongst the topics discussed both in the official meetings and the civil society events organised in Tokyo in mid October.

 

PRESS RELEASE: Appointment of next World Bank head: Campaigners demand fair selection process

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Joint media statement

Reacting to the announcement that Robert Zoellick is stepping down as World Bank President, a global coalition of campaigners has called for an open and merit-based process to elect the next World Bank leader, and for developing countries to determine the selection. 

The campaigners, including Oxfam, Eurodad and the African Forum and Network on Debt and Development (Afrodad), have also asked the US to announce that it will no longer seek to monopolise the Presidential position. A “gentlemen’s agreement” between Europe and the US dating back to World War II ensures that the President of the World Bank is always an American, and a European IMF Managing Director.

Elizabeth Stuart of Oxfam said: “The way the World Bank picks its president needs to change. The Bank only operates in developing countries, so any candidate not supported by a majority of these countries would plainly lack legitimacy.”

In an open letter to World Bank governors, the campaigners demanded that:

  • The new President is selected by a majority of World Bank member countries, not just a majority of voting shares – the majority of these are from low and middle-income countries.
  • The selection process is open to anyone to apply, with interviews held in public and with open voting procedures.
  • A clear job description and required qualifications is set out, and that these include a strong understanding and experience of the particular problems facing developing countries. 

Jeroen Kwakkenbos of Eurodad said: “The next World Bank chief can’t be selected in a behind-the-scenes carve-up. The second wave of global economic crisis is almost certainly going to start hitting poor countries very hard, very soon. The World Bank needs to be geared to respond with credible, legitimate leadership in place. The US should no longer seek to monopolise this position.”

Collins Magalasi of Afrodad said: “It’s a World Bank, not a US Bank. It needs the best candidate to get the job with support of wide Bank membership, not just the US”.

***

For information:

In Washington, DC: Caroline Hooper-Box Caroline.hooper-box@oxfaminternational.org Mobile: +1 202 321 2967
In New York: Jesse Griffiths jgriffiths@brettonwoodsproject.org Mobile: +44 7968 041 747
In London: Peter Chowla pchowla@brettonwoodsproject.org Mobile: +44 7877 596 893

Notes to editors

  • The World Bank’ Ministerial level executive board, the Development Committee, has endorsed an “open, merit-based and transparent” selection process.

The following are quotes from World Bank Development Committee communiqués:

October 2010 – “We reiterate the importance of an open, merit based and transparent process for the selection of the President of the World Bank Group.”

April 2010 – “We reiterate the importance of an open, merit-based and transparent process for the selection of the President of the World Bank Group.”

October 2008 – “There is considerable agreement on the importance of a selection process for the President of the Bank that is merit-based and transparent, with nominations open to all Board members and transparent Board consideration of all candidates”

  • Having the new World Bank president be selected on the basis of the support of a majority of both voting shares and member countries could be agreed by the Board, without any formal changes to the Bank’s articles of agreement. To make this work, countries would need to vote independently, not through their constituencies, and declare their support publicly.