Sen. Lugar Stresses Transparency in MDB Replenishment Legislation

1 June 2005

The Republican chairman of the U.S. Senate Foreign Relations Committee, Richard Lugar (R-Ind), has made transparency reforms the central focus of legislation that also would authorize U.S. contributions to five multilateral development banks.

Lugar’s bill contains instructions to the U.S. representatives at the five institutions, including the World Bank, and tells them to support several anti-corruption and transparency reforms, many of which go beyond current U.S. policy.

Among other things, Lugar’s transparency laundry list proposes the release of “draft” documents containing staff recommendations about projects, policies and country assistance strategies in advance of their consideration by MDB executive boards.

A theme running through the proposal is a desire to fight corruption, and the senator suggests establishment of a special trust fund at the World Bank to help countries do so, a new idea not contained in previous legislative instructions. The bill, S. 1129, was introduced May 26, and probably will be acted on this summer.

One section of the bill would commit the Bush administration to pressing for disclosure of revenues received or paid for the extraction of oil or other natural resources by governments and companies that receive MDB assistance.

Although most of the proposed changes would require concurrence by member countries of the MDBs, a few reforms could be implemented by the U.S. government unilaterally. Going further than he has in the past, Lugar wants to see the Treasury Department post on its web site a justification for the votes by U.S. representatives at the institutions. He also would mandate disclosure of written statements made by the U.S. government about controversial MDB projects, policy decisions, and claims brought before an inspection panel.

Disclosure of Draft Documents

Lugar endorses the release of so-called draft documents, including “loan, credit, and grant documents, country assistance strategies, sector strategies, and sector policies” in advance of their consideration by the institutions’ executive boards. The usual disclosure timeframe would be 15 days, but for country assistance strategies, the standard would be 120 days in advance of board consideration.

The Indiana senator’s bill supports the release not only of board meeting minutes, but also of the more detailed summaries of meetings, after 60 and 90 days respectively. A written transcript should be available to the public after 5 years, according to the bill. Exceptions for sensitive material are included.

Financial disclosure of possible conflicts of interest by MDB staff members is another reform urged in the bill that has not been among previous congressional instructions. The bill also aims to change the “pressure to lend” incentive structure at the Bank.

Stronger whistleblower policies are also stressed in Lugar’s bill. A related reform would mandate the coordination of contractor debarments so that an action by one institution would make a contractor ineligible for contracts with the others.

U.S. representatives are also instructed to support a series of anti-corruption policies, including requiring all MDB contractors sign a code of conduct promising not to make bribes. Lugar supports creation of independent auditors at each MDB and a number of improvements of the evaluation process.

Another section seeks to establish appeals mechanisms to govern compensation decisions for persons affected by MDB projects.

Extractive Industry Disclosures

Regarding extractive industry revenues, the Lugar bill says U.S. officials should encourage World Bank policies that support more disclosures and widespread dissemination of that revenue information. Lugar says these policies also should apply to state-owned companies.

The Lugar bill would mandate that not later than two years from the date the bill passes, U.S. policy should be to oppose giving MDB assistance (except for humanitarian aid) to “resource dependent” countries unless they have met the extractive industry disclosure standards, and unless the private sector sponsors also have agreed to disclose revenue payments to host governments.

The bill also asks for the preparation of a variety of reports in MDB transparency practices in future years.

By Toby McIntosh

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ABOUT IFTI WATCH

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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