Disclosure or Deception? Multilateral Development Banks and Access to Information

1 October 2002

By Shalmali Guttal, Focus on the Global South, October 2002

Multilateral institutions such as the Asian Development Band (ADB) and the World Bank pride themselves on their information disclosure policies. Especially since the Asian economic crisis, they have held their policies up as evidence of their commitment to transparency, accountability and participation.

Information disclosure policies and practices, however, need to be located in the larger context of rights and governance. Not only must they provide full access to information, but also, they must facilitate timely and informed action by concerned actors. Meaningful public participation in contemporary democratic processes requires informed discussion and debate. Unless a public is fully empowered with all the relevant and required knowledge within a relevant time frame, its participation in a given situation is cosmetic at best.

Today, the public’s right to know is considered indisputable by most proponents of democracy, and articulated in the Universal Declaration of Human Rights and International Covenant on Civil and Political Rights. By “governance,” I refer to a comprehensive and transparent system of rules, processes and procedures that ensure the protection of peoples’ rights to knowledge and decision making, as well as accountability for decisions made and actions taken. Policy and programme decisions have economic, social and political consequences, and it is crucial to examine whether those who bear the greatest costs of such decisions have been adequately and sufficiently involved in making these decisions.

Based on the above standards, both the ADB and the World Bank fail in their practices on information disclosure and access to information. As this paper will show, both institutions are completely unaccountable to the public, highly non-transparent in their policy-programme formulation and decision making, and irresponsible in their stated commitments to promote public participation, and equitable and fair access to information.

Indeed, their information disclosure practices neither provide the public with complete, accurate and reliable data, nor do they facilitate public participation in the development of their respective policies and programmes. More often than not, the primary aim of these practices appears to be to keep the public occupied with sometimes interesting, but largely irrelevant, information while the Banks go on with business as usual. This is not information disclosure in any meaningful sense. This is deception.

The Politics of Information Disclosure

Access to information is primarily a political issue that is embedded in power relations and the exercise of power. It involves not only the ability to access information that already exists but also the very generation of information that could enhance the public’s ability to participate in making decisions about their future. The capacity to generate information and to enshrine this information in social and institutional memory as “knowledge” is indeed a powerful one.

The World Bank and the ADB have this capacity and have used it to their full advantage in the name of information disclosure. The information disclosure policies of these two public institutions, although different in form and articulation, have similar fundamental shortcomings.

1. Irrelevance to decision making

The most obvious flaw in both Banks’ information disclosure policies is that they have little to do with influencing the key policy and programme decisions made by the two institutions. It does not matter how much paper or how many megabytes the Banks make available. The fact remains that the most important decisions are made according to the economic and political interests of their more powerful members and not according to broad-based public interests.

Equally important here is the issue of how decisions within the Banks are made. Again, public debates or public interest priorities have little meaning here. Government representatives from the member countries of the two institutions do not have equal weight in negotiations and discussions. It is widely acknowledged that a significant reason why developing countries have been disadvantaged by multilateral institutions is that they have been marginalised from the formal decision-making systems of these bodies.

In the World Bank, formal decision-making power is based on the size of capital subscriptions. The United States (U.S.), with a hefty 17.6-percent voting power, has the formal clout to veto decisions not to its liking. It has also managed to limit the capital share and voting power of Japan-the only possible contender to its powerful position in the Bank–to eight percent.

Formal power is further supplemented by informal mechanisms. The World Bank president is always a U.S. citizen and the Bank’s location in Washington DC has helped to ensure that (U.S. Treasury-approved) U.S. citizens account for a quarter of senior management and higher-level professional staff. According to a U.S. Congressional Research Service analysis, the advantage of the World Bank and multilateral development banks to the United States (and other rich lenders) is that they are able to demand performance standards of their borrowers that Washington and other creditors may be reluctant to impose on a bilateral basis.

What Japan has lost in the World Bank, it has claimed in the ADB. According to a number of ADB insiders, this Bank operates by the rules of “Japanese culture.” Decision-making is “consensus-driven” (Japanese style) and takes place through informal discussions in hallways among select members of senior management and the Board. The ADB also has key senior positions reserved for the nationals of its more powerful capital subscribers. Sole and final authority on all decisions rests with the Bank’s President, who also chairs the Board of Directors and, most important, is always Japanese. The position of ADB General Counsel, however, has been cornered by the U.S.

Although ADB Board members are expected to consult with the national capitals they represent for major policy decisions, senior management officials have no such cumbersome requirements. Their primary concern is to ensure that no policy or issue goes to the board unless they are confident that it will receive majority approval. And if this approval is not possible through informal “consensus building,” senior management is likely to delay the process by bringing additional steps into the formal decision making process. According to a senior staff member, the ADB is “one of the most non-accountable, non-participatory and non-transparent institutions around”.

Decision making in the ADB and the World Bank is thus controlled by exclusive, closed circles of top leadership and senior management and guided by multiple levels of self-interest. The present information disclosure policies of the two Banks are certainly not going to change this situation.

2. Selective disclosure

Another fundamental flaw in the Banks’ information disclosure policies is that they only make public what is convenient to them and when it advances their institutional interests. What they do not disclose always turns out to be more important than what they let the public see.

For instance, the World Bank’s recently revised information disclosure policy continues to focus on providing people with information about decisions already taken, rather than making available the information needed for the public to participate in decision making. In the new policy, key documents such as tranche release memoranda, the Bank president’s reports, drafts of Country Assistance Strategies (CAS) for most countries, and the draft and final documents for most structural adjustment lending will not be made available to the public.

The Bank’s board was apparently divided on the question of transparency in structural adjustment lending. These divisions are reflected in the complicated agreement that was eventually reached. For instance, final versions of some documents for low-income borrowers will be made available, while documents pertaining to middle-income borrowers will be left to the “discretion” of borrowing governments to disclose.

According to the Bank Information Centre (BIC), a U.S.-based policy research organisation that has exhaustively monitored the World Bank’s information disclosure process, the World Bank under its new information disclosure policy has essentially abdicated responsibility for its own transparency by pushing such disclosure decisions onto borrowing governments. It has thus clearly chosen to deny the public its right to access key documents regarding structural adjustment lending.

The new policy has also ensured that the World Bank’s Board of Directors will continue to govern in total secrecy. Again according to BIC, the Board has yet to acknowledge that the public has a right to know how they are being represented within the Bank. Also, almost no progress has been made regarding timely disclosure of information about project lending. While the World Bank claims that it is interested in including project-affected communities in decision-making, it refuses to make available to the public important documents about project design, implementation and financing until after decisions have already been made.

The ADB, for its part, proudly touts its website and the number of reports it has made available as evidence of its commitment to information disclosure. But a source close to the ADB says what is not on paper is the real issue. In fact, what is available on the website, or in published form is not pertinent to the ADB’s decision-making processes. Too many decisions are made through closed, informal discussions that should in actuality be open to the public.

At the same time, much of this information, as well as access to such discussions are not equally shared within the institution. Delegates from poorer and less powerful nations are as likely to be kept out of the loop as the general public in the ADB’s borrowing countries.

The ADB brand of secrecy is amply demonstrated in how it has handled Thailand’s Samut Prakarn Wastewater Management Project (SMWMP), in which it is providing more than 30 percent of the total financing. The project entails channeling wastewater through pipes from some 3,600 factories in Samut Prakarn province in Thailand to a site, some 20 kilometres away, which happens to be in a residential area. Effluents discharged from the plant will seriously impact the surrounding marine environment on which more than 50,000 village residents depend for their livelihoods. Despite repeated requests by the affected residents and some Thai legislators, the ADB did not disclose the project profile and procurement documents, or even initial environmental and social impact assessments.

Affected communities and supporting non-governmental organisations (NGOs) then presented to the Bank substantial data regarding the project’s potential negative impacts. They also noted how the project may have violated both Thai laws and many of the ADB’s own operational policies, such as those covering supplementary financing for cost-overruns, anti-corruption, governance, confidentiality and disclosure of information, and environmental assessment requirements. The ADB’s response was that it saw no evidence of wrongdoing or negative impacts. It did not, however, disclose the evidence on which it based this assessment.

After a prolonged debate, the ADB acceded to the affected communities’ request to have the SMWMP inspected. In October 2001, the project went through the ADB’s official inspection channels. But this process also was racked with non-transparency, conflicts of interest and antagonism among the Bank’s senior management and staff, Inspection Committee, Inspection Panel, and the Thai Government. Eventually, the Inspection Panel submitted a report to the Inspection Committee without the Panel ever visiting the project site or having direct consultations with the affected communities. Even so, the inspection report found that the ADB was in non-compliance with a number of its most important policies and procedures, and that the project should have been completely re-appraised at a much earlier stage, well before a supplementary financing loan for the project was made.

It took the ADB several months to make this and other related documents available to the general public. Even those who had requested the inspection in the first place were not contacted by the ADB about the inspection report until several months after it was submitted. Moreover, to date, all that the ADB has made public is a summary of its conclusions about the Inspection Committee’s recommendations. The nature of deliberations within the ADB Board regarding its responsibility and liability remain secret, even as work on the project continues.

3. Dubious quality

Given the high degree of secrecy that governs the information disclosure policies of the World Bank and the ADB, it is difficult to trust the quality and integrity of the information that they make available to the public.

In the case of the World Bank, a clear example of its doublespeak can be found in the debate about the Chad-Cameroon pipeline in West Africa. Backed by the World Bank, the project entails extracting one billion barrels of oil in Southern Chad and transporting it through 660 miles of pipeline to a facility in Cameroon. Based in two of the world’s poorest countries, the pipeline will cost approximately $4 billion and will be built by a consortium of private companies led by Exxon-Mobil.

The project has been sharply criticised by a number of local and international NGOs, who claim that the social and environmental impacts of the project outweigh its benefits, and that the project is likely to exacerbate human rights abuses in the region. But the World Bank maintains that the project will bring in revenues for poverty reduction, catalyse greater democracy and facilitate civil society participation in policy debates.

Interestingly, a confidential report by the Bank’s own independent inspection panel has noted that Chad will get only five percent of the royalties from the project and that the local population will not get a fair share of the project’s profits. The panel also found that the environmental impact assessment undertaken by the Bank made a “serious omission” by not taking into account the pipeline’s cumulative environmental impacts.

Not be deterred from its support for the project, the Bank has rejected the panel’s findings, saying the suggested approach to environmental assessment would have been “cumbersome and ineffective”. It also insists that regardless of the low royalties for oil extraction that Chad might receive, the region would still benefit from the revenues earmarked for health, education and infrastructure.

The World Bank’s past record, however, does not inspire confidence in such claims. One of the Bank’s own internal reports in 1999 indicated that the Bank legitimised false statistics, tolerated corrupt regimes and was complacent about human rights abuses in many of its borrowing countries. Many World Bank financed infrastructure projects have been marked with scandals of corruption and bribery, which occurred even as senior Bank staff reported that all was well. This includes the recent Lesotho Highlands Water Project in Lesotho and the Bujagali dam in Uganda. Moreover, according to the 2000 Meltzer Commission Report, the Bank’s project failure rate is 65 to 70 percent in the poorest countries and 55 to 60 percent in all countries. In fact, the Meltzer Commission openly challenges the Bank’s grandiose claims about its efforts in alleviating poverty.

The ADB has not had much success with quality or integrity either. The information it provides about its own policies is in fact out of date with developments within the institution. For example, long pending reviews of its information disclosure policy and its inspection policy have yet to be conducted. Preliminary problems with both policies thus far have been kept secret, as have debates between senior management and the board about the quality of ADB programmes and projects. The ADB’s lawyers have advised Board members and management not to make public statements about the status of project inspection policies and processes (as in the case of Thailand and Sri Lanka) since there is such a lack of clarity within the institution about its most current positions.

There is also the matter of the outdated Operations Manual for ADB staff. Operational policies and procedures that should have been reviewed years ago are still unchanged, while other policies approved five years ago have still not been included in the Manual – at least not in the version that is usable by the Staff or is publicly available. As a result, there has been a great deal of confusion among Bank staff as to which policies they should follow – those on paper (but outdated), or those agreed by the board (but not yet included in the Operations Manual).

Governance: a Morass of Contradictions

That their information policies and practices are inherently flawed and useless to the public are not the only reasons why we should doubt the ADB’s and World Bank’s commitment and competence in the area of governance. Equally important is the fact that internal and external governance in both banks are in complete disarray, and they would do well to take a critical look at themselves before they tell others what to do.

Take the World Bank’s attempts to bolster its image by engaging the public in at least two global initiatives: the Structural Adjustment Programme Review Initiative (SAPRI) and the World Commission on Dams (WCD). In both these initiatives, civil society organizations – which included many long-time critics of the Bank – entered into what they hoped would be good faith processes of research and dialogue with a variety of opposing interest groups. And despite challenges and compromises, they stayed with the initiatives.

In contrast, the World Bank started to backpedal as soon as it became clear that the two reviews were generating information that contradicted its self-created scorecards of success in structural adjustment programmes and support for large dams. In the case of SAPRI, the Bank produced a separate report, which ignored the findings of the research that its own staff were involved in, and which (not surprisingly) arrived at conclusions opposite to those of the SAPRI research. By so doing, the Bank effectively closed off any substantive or meaningful discussion with the public about its structural adjustment programmes. As for the WCD, the Bank more or less rejected the Commission’s findings and is taking refuge behind opposition to the report by some country governments as an excuse not to implement the WCD recommendations.

In the meantime, the World Bank continues to impose structural adjustment through a new programme – the Poverty Reduction Strategy Papers (PRSP), which the Bank claims are nationally owned and participatory. Investigations by civil society groups into the PRSP process, however, reveal that it is plagued with the same flaws of policy and conditionality impositions, inaccessibility of information and absence of any serious learning from past Bank-Fund imposed reform programmes. Participation is restricted to selected, well-placed NGOs offering comments on pre-prepared documents rather than being able to effect any substantive change in the Bank’s lending programmes.

And to maintain its charade of openness, the Bank has entered into yet another global review process, this time of mining and extractive industry. The Bank has shown some institutional learning here, but this is not good news. The process is far more closed and exclusive than the WCD, and the Bank is attempting to exercise greater control than before over the review structure and process.

On another front–despite its rhetoric about good governance–the World Bank has actively undermined fights against corruption through its own practices. A good example here is the Lesotho Highlands Water Project (LHWP), which was financially coordinated and supervised by the World Bank, and could set a precedent for the prosecution under national laws of corruption and malpractice in large infrastructure projects.

Since 2001, the Lesotho High Court has been investigating charges of bribery against major international dam-building companies and public officials in connection with the project. But instead of supporting a nationally accountable legal process, the World Bank early this year quietly conducted its own internal investigation of three companies charged with paying bribes. Its conclusion: there is insufficient evidence to punish these companies for corruption. This is despite the Bank’s acknowledgement that the companies paid “commercial fees” to a middleman who has been found guilty of paying bribes to Lesotho officials with the fees paid by the companies.

The Bank’s conduct has drawn outrage from government and non-government actors alike, and has led many to conclude that it is not serious about rooting out corruption in its projects. First, the Bank did not investigate all the companies involved in the project, but only those that it directly financed, ignoring the fact that the companies got involved in the project because it was backed by the World Bank. Second, by concluding its internal investigations while the Lesotho Court proceedings were still going on, the Bank effectively allows the companies to use the Bank’s findings to contradict the Court. And third, the Bank did not release any information about its investigations or findings.

In a welcome turn of events, the Lesotho High Court recently found Acres International, a Canadian firm that the Bank cleared in its internal investigation, guilty of paying nearly US $ 266,000 to the former Chief Executive of the LHWP. Unlike the Bank, the Lesotho High Court did not buy the “middleman” defense. Acres International is a long time ally and pet contractor of the World Bank in infrastructure projects worldwide. It remains to be seen whether the Bank will put its money where its mouth is and disbar Acres from future bank contracts, as instructed in its anti-corruption policy.

Sources close to the World Bank have indicated that the institution may well be on a path of “downward harmonisation” of project and programme standards to ensure that it does not lose its borrowing and infrastructure clientele.

The ADB’s Share of Struggles

The ADB has its own problems of internal governance, non-transparency and lack of participation. To be sure, the ADB has yet to show how it operationalises good governance in its own institutional conduct. The only concrete examples it can offer of Bank facilities for good governance are its corruption “hotline” and its inspection function. The corruption hotline does not provide the public much by way of access into the Bank since despite agreement that phone-calls to the hotline can be anonymous, there is little clarity about what happens next once it receives a tip-off about corruption or malpractice in an ADB-supported programme or project.

In addition, the ADB’s inspection function is already proving to be an avenue for the Bank to evade responsibility for poor performance, wrong decisions and involvement in harmful projects. The SMWMP was the first project to go through the Bank’s inspection process and opened a can of worms within the ADB, highlighting problems of poor leadership, staff confusion, and lack of responsibility and accountability. It revealed the inconsistencies among the ADB’s stated policies, what is recorded on paper and actual implementation.

But one particularly alarming internal by-product of the SMWMP inspection process appears to be a rush within the ADB to update the staff operations manual so that there could be some sort of protection for Bank Management from future inspection processes. According to sources close to the ADB, the Bank is trying to arbitrarily decide which of its policies and even which parts of its policies should be subject to inspection, and which should not. In the future, therefore, project managers are likely to be in a bind about whether they should focus their efforts on faithfully meeting project/programme objectives, or on implementing “inspectable” policies and thereby protecting themselves from the risks of future inspection processes.

Like the World Bank, the ADB also appears to be moving towards a general lowering of programme and project standards by arbitrarily deciding which of its policies and procedures are “inspectable” and which are simply “good practice.” The thinking appears to be that the less the ADB opens itself for investigation, the less responsibility it needs to assume for problems in its projects.

Yet whatever is deemed “inspectable” would still be shielded from external accountability by the ADB’s immunity to local and national laws, as guaranteed by its Charter. A memo from the ADB secretary to the Bank’s directors and alternate directors (March 6, 2002) and the ADB counsel’s legal opinion on the Bank’s potential liability under the inspection function (December 26, 2001) show that by virtue of the immunity provided by its Charter, the ADB is not liable for any findings of wrongdoing through the inspection function, and that it is protected from any legal action that may arise from such findings.

Internal documents indicate that the rationale for the ADB’s inspection function is clearly based on the immunity it enjoys and serves as little more than the Bank’s public face of good governance. But this function falls severely short of universally accepted standards and systems of good governance. As things stand, final decisions about the Bank’s compliance to policies and procedures, and assessment of institutional and staff conduct rest with the ADB’s board of directors, on the advice of senior bank management. The ADB, then, is its own investigator, jury and judge, with no obligations of external, public accountability.

The ADB is currently engaged in a review of its inspection policy and process. It remains to be seen whether there is sufficient political will and commitment within the Bank to shape the inspection process so that it becomes a genuine avenue of redress for those negatively affected by the Bank’s operations.

A Long Way to Go

Secrecy in the policies and practice of information disclosure to the public is a violation of the social and political compacts between a people and their government. Governments are-at least in theory-expected to be accountable to their citizens for the decisions they make. Going by the principles of transparency and participation, their decision-making processes are also expected to be open to public scrutiny and debate.

Multilateral institutions argue that they are directly responsible to the governments that constitute their clientele, and not to the general public. This is a significant reason why decision-making and democratic oversight in the World Bank and the ADB are becoming increasingly remote to the public. But there is still a sham of openness going on. Most likely, as the World Bank and the ADB decrease their external accountability, they will “disclose” a lot more irrelevant information through paper and megabytes.

It should be remembered, however, that the ADB and the World Bank are public institutions: their financing base comes from capital subscriptions by member countries, their financial credentials are guaranteed by governments, many of their programmes and projects are financed through bilateral funds, and their governors and boards are made up of ministerial level officials from member countries. Moreover, their policies and operations have severe and long-term consequences that are not borne by governments, but by the populations in client countries. And the less directly accountable a public institution is to the public, the more open and transparent it needs to be in order to uphold and prove its stated commitments to democracy, good governance and social responsibility.

Unless they can set their own house in order, the ADB and the World Bank are in no position to sermonise to the world about transparency, accountability, participation and good governance.

Shalmali Guttal is the Coordinator of the Micro-Macro Issues Linking Programme at Focus on the Global South (s.guttal@focuseb.org). This paper is based on her presentation at the Conference, “Access to Information” held in Hua Hin, Thailand, March 4-6, 2002. Focus website: www.focusweb.org

Selected References:

Asian Development Bank

Aubugre, Charles. “Still Sapping the Poor: A Critique of IMF Poverty Reduction Strategies.” ISODEC: June 2000.

Bank Information Centre. “The Ongoing Struggle for World Bank Transparency – The Outcome of the Information Disclosure Policy Review.” November 2001.

Bank Information Centre. “The Asian Development Bank’s Inspection Function.” February 2002.

Bank Information Centre. “Testing ADB Accountability: The Case of the Samut Prakarn Wastewater Management Project in Thailand.” February 2002.

Bello, Walden. “Prospects for Good Governance: The View from the South.” Focus on the Global South, October 2001.

Focus on the Global South. “Good Governance or Bad Management; An Overview of the ADB’s Decision Making Processes and Policies.” May 2002.

Focus on the Global South. “Too Hot to Handle; The Samut Prakarn Wastewater Management Project Inspection Process.” May 2002.

The Bretton Woods Project

The Halifax Initiative. “Halifax Initiative Submission to Consultation on Draft Information Disclosure Policy.”

The World Bank

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In this column, Washington, D.C.-based journalist Toby J. McIntosh reports on the latest developments in information disclosure in International Financial and Trade Institutions (IFTI).
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