| |
Contributions from
the Column
Tribune
The itinerary of an idea
Policies need clear focus
The World Bank’s use of country systems
10/2004
|
|
[ Social and environmental safeguard policies ]
The World Bank’s use of country systems
The World Bank’s safeguard policies ensure high environmental and social standards in projects it funds. Applying national sets of rules and regulations which offer comparable protection could help increase sustainability and reduce the number of isolated solutions.
[ By Qays Hamad ]
The World Bank’s safeguard policies aim to avoid harm for the affected population and their environment or, at least, to reduce negative impacts. At the same time, the safeguards offer a mechanism to involve stakeholders in the project design. They also provide rules for arbitration and compensation procedures. Ideally, both aspects enhance the local population’s ownership of the project.
The safeguards have developed from various sets of regulations, which include the Bank’s Articles of Agreement, Operational Policies and internal Best Practices guidelines; they are constantly being updated and adapted. The safeguards are contractual elements of the credit agreements for World Bank loans and any infringement can delay disbursements. Among other things, the safeguards regulate when and how Environmental Impact Assessments are to be carried out, how to proceed in resettlement cases, how indigenous peoples are to be properly protected, when and how consultations with the affected population are to be held, or how biotopes and habitats are best dealt with.
These principles are widely appreciated – even among the World Bank’s sharpest critics. Following an initiative launched by the World Bank subsidiary International Finance Corporation (IFC), 24 international banks (including the Dresdner Bank and the West LB from Germany, Citigroup from the USA and Credit Suisse from Switzerland) have committed themselves to the so-called ‘Equator Principles’ – which means voluntarily adopting and implementing the World Bank safeguards (www.equator-principles.com).
In contrast to the safeguards proper, the overall approach has several systematic weaknesses:
– Firstly, the safeguards create isolated solutions, limited in terms of both space and time. Two sets of rules and regulations prevail during the duration of the project: the safeguards for projects with World Bank participation and national laws for undertakings with local funding. In the latter cases, one occasionally still finds terrible conditions with regard to environment and the local population.
– Secondly, the safeguard approach is not suitable for “development policy lending” (the former “adjustment lending”), which essentially means de facto support for the national budget. This does not allow clear links between funds and individual projects. Yet this is exactly what the application of the safeguards demands. A possible solution could be the Country Environmental Analysis, which considers the entire country and is thus better able to take account of the fungibility of development policy lending.
– Thirdly, there are limitations due to size. In the case of large-scale infrastructure projects, meeting the project-based safeguards exceeds the bounds of manageability. The Environmental Impact Assessment for the Baku-Tbilisi-Ceyhan pipeline, for example, comprises no less than 11,000 pages. This kind of volume does not allow any clear conclusion to be drawn.
For these reasons, the World Bank is now proposing to increasingly apply the legal standards of the partner countries (“country systems”) in particular in middle-income countries (MICs). In so doing, the Bank will assess the national regulations and, what is particularly important, the quality of their enforcement. The goal is to establish to what extent these laws and regulations can be substituted for the World Bank safeguards. If there are discrepancies between the national standards and the safeguards, the partner country will have to demonstrate how the gap will be closed (“gap analysis”). If, however, the national regulations are certified as being equal to the Bank’s Safeguards, they will replace the latter in the contract.
The World Bank would continue to monitor compliance with the law. Monitoring would have to be intensified in the early stages. The aim is not to accept any lowering of standards. Should the investigation not approve of national standards and capacities, the usual safeguards would continue to be applied for project implementation. This kind of certification is currently being tested for three countries, in one of them, Mexico, the application of national standards within the pilot project ‘Decentralised Infrastructure Reform and Development Project’ is underway.
The advantages of the country system approach are obvious:
– Firstly, it would take the more advanced legal standards of the MICs into account. This complies with the principle of ownership. Furthermore, the regulations would outlive current projects and, accordingly, increase sustainability.
– Secondly, the bureaucratic burdens can be reduced for borrowers. After all, a number of MICs have already been taking advantage of their improved access to the private capital market. Private loans are more expensive but do offer lower transaction costs and allow greater flexibility for the borrower. This shift in borrowing has a lot of drawbacks in development terms. Most significantly, the World Bank’s influence with regard to environmental and social standards is being eroded. Moreover, the World Bank is losing business, the revenues of which it urgently needs to (co-)finance other instruments such as, for instance, the Heavily Indebted Poor Countries (HIPC) Trust Fund of the debt relief initiative.
– Thirdly, high environmental and social standards can find their way into national legislation. Here, considerable capacity building would occur, since the assessment and certification of the national law would highlight any deficiencies in the dialogue with the partner country. The partner country would then have to demonstrate how and when it would remedy the shortcomings. The Bank would support this with technical support and advice.
– Fourthly, the new approach serves donor harmonisation. Inadequate regulatory frameworks usually lead donors to impose conditions in order to achieve acceptable standards for their projects. Uniform high standards in the partner country would allow donors to rely on them.
The implementation of the country systems approach will undoubtedly be lengthy. However, the fact that environmental and social standards are being developed in the countries concerned is a positive step. The example of India illustrates just how important this is. After almost 60 years of dam projects financed by the World Bank, India still lacks up-to-date national regulations for resettlement. Such issues are still dealt with according to the ‘Land Acquisition Act’ (LAA) of 1894. The World Bank has, so far, applied the safeguards instead.
The assessment and certification of national laws and their implementation will continue to be carried out by the World Bank. Criticism according to which the Bank is pushing responsibility onto partner countries is merely a rather negative interpretation of the fact that these countries are now being actively involved in responsibility. In any case, the success of the country systems approach will depend on a number of factors:
– Firstly, there must be a transparent system for comparing national laws and regulations with the safeguards. The Bank has to apply universal criteria for this purpose.
– Secondly, using intensified monitoring, the Bank has to ensure that the results of the certification are confirmed in practice. For example, the Bank management must ensure protection against subsequent legislative amendments in the partner country.
– Thirdly, the role of the World Bank Inspection Panel has to be adjusted. So far, the panel examines whether the Bank observes its own rules and constitution. However, it is not competent to check whether national laws have been correctly interpreted and applied. This is a matter for the local jurisdiction. For the World Bank management to remain responsible, the certification process itself must become part of the Inspection Panel’s mandate.
It is out of the question to abolish the safeguards – and worries about this on the part of civil society activists are unfounded. The country systems approach is only being tested in a few countries with advanced regulatory frameworks. It will not abolish or replace the safeguards in general, and it cannot and will not be expanded into countries with inadequate regulatory capacity. Furthermore, the management of the Bank will remain responsible for the certification process and project implementation. Moreover, the Board still reserves the right to give final approval to each individual project. Evidently, that this approach will initially remain limited to few countries. Nonetheless, it makes sense to start the process underway. The alternative would imply ignoring progress made in partner countries or – worse still – even blocking it.
Website:
http://www.equator-principles.com
Qays Hamad
is Ass. Head of the Division “World Bank Group, IMF and Debt Relief” in the German Development Ministry. This article reflects his personal view.
Hamad@bmz.bund.de
|
