Best Practices on Transparency Among IFIs

12 September 2005


The Asian Development Bank has pulled markedly ahead of other international financial institutions in its standards for disclosure and civic participation, but like its sister international organizations the ADB continues make slow progress when measured against the increasingly refined transparency agenda of critics.

In recent years several international finance institutions have adopted improved transparency policies, including the World Bank, the Asian Development Bank, the Inter-American Development Bank, the European Bank for Reconstruction and Development and the African Development Bank.

While still not meeting ideal standards, the IFIs have instituted many reforms worthy of note and imitation. Increasingly, the IFIs are looking at each other for ideas on the “best practices.”

One major benchmark, published in early 2005, is part of a complex research tool for comparing transparency across the IFIs, prepared by the Bank Information Center and freedominfo.org. The IFI Transparency Indicator compares 11 institutions against more than 200 objective indicators. For each category the IFI Transparency Indicator includes description of a desired outcome; collectively forming a pro-transparency agenda.

Also under development by a consortium of groups, the Global Transparency Initiative, is an international standard on transparency for international organizations.

These ideal policies exceed current IFI practices. But positive change is under way. The trend is progressive, if slow. The transparency of these world institutions is advancing; but will the rate be adequate to meet their own aims? All IFIs concur that transparency and more public input improves outcomes and image.

Attempting a Synthesis

In attempting to synthesize progress so far, this analysis seeks to highlight major groupings around which much discussion focuses, but does not cover all items in the matrix. These entailed grouping related items together to describe transparency policy around 10 general topics, such as the handling of disclosures surrounding projects before they are approved. An attempt is made to pick the IFI doing the best in each category, with due regard for second bests and special efforts.

The following analysis includes recent reforms adopted by the World Bank and the Asian Development Bank, and is based on material from the nine-month-old IFI Transparency Indicator data, launched in February 2005, in which the WB and ADB changes will soon be reflected.

This does not represent a scientific ranking based on the Transparency Indicator. Despite a lot of earnest cogitating and brainstorming, the very detail of “the matrix,” as its originators called it, remains one factor making it difficult to construct a mathematical rating system. Prioritization and weighting presents other challenges.

Consolidation also leaves some areas out, or under represented. For example, the World Bank has recently decided to release its administrative budget, its annual work program and budget proposal and its medium-term strategy framework that contains some budget and financial information. Comments are welcome.

Finally, “best practices” depends on when the snapshot is taken. The picture may change in late 2005. Two institutions now are in the middle of reconsidering their policies – the IFC and the EIB.

Overall, transparency advances outnumber reverses, but the pace of change is slow. Many of the easiest changes have been made – such as valuable publication of agendas – while other significant potential reforms – such as publication of detailed minutes – are meeting resistance and coming along more slowly. Major unmovable objects generally include reforms that put boards under greater scrutiny.

One major recent disappointment was the failure of the World Bank board to accept staff recommendations favoring the release of certain proposed policies as they go to the board for a decision.

But recent years have seen positive change. Perhaps the ADB’s position as the front-runner at this point flows largely from being the institution that has just finished its comprehensive review. There does appear to be an effort among the institutions to observe each other’s experience and policies.

Element One: Timing of Disclosure About Prospective Projects

Is a project under consideration? An important element of transparency is the disclosure of the very existence of a prospective project. Most institutions say something about projects “in the pipeline,” but the pipes come in various circumferences and lengths. The tests for disclosure policy in this area relate to how early in the process public notice will be given and/or how long before board action will the public know a project is under discussion.

For the ADB, the initial Project Information Document (PID) for private sector projects will be made publicly available “after ADB has determined that a project is likely to be presented to the board, but no later than 30 calendar days before the date of Board consideration.”

Concerning disclosures of potential environmental risks, often a critical part in project evaluation, the institutions vary widely, with some setting firm timelines and others operating based on other criteria. For environmentally sensitive projects, an environmental impact statement At the ADB is to be made available 120 days before the date of board consideration, and the PID will be made available on the same 120-day advance schedule.

The African Development Bank established a more flexible standard for releasing the environmental statement, one that holds out the possibility of early release and translation into local languages. The policy states: “For Category 1 projects the project sponsor gives public notification and makes the draft EIA report available at a public place readily accessible to project stakeholders at the earliest possible stage prior to project presentation to the Board. The document should include all supplements and addenda to the EIA report requested by the Bank and the responses to the public consultation process. In addition, a non-technical EIA report summary in the local language shall be proactively disseminated to local stakeholders.”

The IADB policy says EIS documents will be made before the analysis mission is conducted. At the World Bank, the Environmental Assessment for high impact projects is disclosed “after the borrower has made the draft Environmental Assessment report available at a public place accessible to project-affected groups and local NGOs…, and after such EA report has been officially received by the Bank, but before the Bank begins formal appraisal of the project.”

Element Two: Completeness of Information About Potential Projects

The ADB, in its new disclosure policy, seems to have developed the most complete formulation for a complete project description.

In defining the elements to be contained in its Project Information Document (PID), the ADB policy states that: “PIDs for public and private sector projects shall include (i) the project title; (ii) sector, thematic, and targeting classification; (iii)project/program number; (iv) type or mode of assistance; (v) location and geographical coverage; (vi) description; (vii) objectives and scope, including expected development impact; (viii) cost and financing plan (for public sector projects only); (ix) implementing agency or project sponsor(s); (x) allocated environmental and social safeguard screening categories; (xi) summary of environmental and social issues; (xii) country context; (xiii) consultations carried out or planned; (xiv) responsible ADB department, division, and officer; (xv) the date of approval of project concept paper or private sector project concept clearance paper; (xvi) the date of PID preparation and most recent update; (xvii) list of feasibility and technical documents prepared or scheduled to be prepared; and (xviii) a timetable for assistance design, processing, and implementation, including estimated dates for appraisal authorization and Board consideration. As the PID is a work in progress, information contained in items (viii), (x), (xi), (xiii), and (xvii) may not be included when the initial PID is made publicly available. These will be included as such information becomes available.”

The ADB supplements its disclosure requirements in other sections, dealing with proactively getting information to affected people. Pledging to work on this outreach with private and public sponsors, the ADB also stresses that such outreach “should start early in project preparation, so that the views of affected people can be adequately considered in project design.”

With regard to related environmental and social safeguard requirements, the ADB policies mandate “early engagement” and “timely dissemination of relevant project information to such communities in an understandable and accessible form.” It continues, “Toward this end, the project sponsor shall inform the ADB, before appraisal, how it intends to engage with affected people.” The same sort of policy is applied to category A private projects, those where environmental sensitivities have been identified: “For category A projects, the borrower or private sector sponsors shall ensure that such information is available to affected people on two occasions: (i) during the early stages of environmental impact assessment field work; and (ii) when the draft environmental impact statement is available, and before appraisal.”

The IFC proposed in a Nov. 24, 2004, draft disclosure policy, to disclose “Action Plans,” developed by clients and reviewed by the IFC in advance of board consideration of a loan. The Action Plan would summarize how the prospective borrower would manage the social and environmental risks associated with its project. This release would supplement the current disclosure of the Summary of Proposed Investment (SPI). The SPI provides a brief factual summary of the main elements of the evolving project: its sponsors, the project company’s shareholders, total project costs, the location of the project, a description of the project and its purpose, the environmental category, and a brief summary of any environmental and social issues. The SPI is updated as necessary to reflect material changes regarding the project that transpire following its initial filing. The proposed policy tasks the clients with engaging local communities early on and “timely” dissemination of the social and environmental risks of their projects.

For all lending operations under preparation for World Bank financing, the Bank prepares a Project Information Document (PID) that provides a brief factual summary of the main elements of the evolving project. In addition, and exceeding other IFIs, it also includes a list of factual technical documents that underpin project preparation (including analytical work, assessments, surveys, etc.). When an interested party requests additional technical information about a project under preparation, the director concerned may release factual technical documents, in whole or in part, after consulting with the borrower concerned.

Element Three: The Handling of Sensitive and Confidential Information

The dilemmas posed by whether to disclose confidential business information has resulted in a variety of responses. While some IFIs provide strong protections for confidential business information, there are emerging signs that such confidentiality will be tempered by competing “public interest” considerations, and will be defined more precisely.

Like most IFIs, the ADB promises to “protect non-public business information.” Its promise is mitigated by requiring that disclosure would have to “materially prejudice” the submitter’s interests. The exceptions list includes No. 8: “Information provided to the ADB by a party that, if disclosed, would be or would be likely to materially prejudice the commercial interest, financial interest, and/or competitive position of such party.” Exception No. 9 says simply says: “Confidential business information.” Importantly, although this is untested, the ADB states that it may disclose information, notwithstanding the exception, “if ADB determines that the public interest in disclosing the information outweighs the harm that may be caused by such disclosure, of if a member country requests it to do so in accordance with its own laws.”

Further, the ADB suggests a possible balancing test. A key footnotes states: “The ‘public interest override,’ may be triggered by, for example, a request for information that reveals a serious public safety or environmental risk.” The picture is further complicated however, by a subsequent paragraph saying that this override provision shall not be used ” (i) if the ADB has given an express legal commitment to a party to keep such information confidential and not to disclose such information, unless such party consents, or (ii) if disclosure of such information is prohibited by an applicable law.” Even when confidential information is protected from release, the ADB policy allows documents to be disclosed, absent the confidential material removed. The policy says the absence of excised material must be noted, and that a reason for its removal be cited.

Element Four: Staff Recommendations on Projects

The IFIs have begun seriously examining the concept that IFI staff recommendations about projects should be made public at the same time they are sent to boards of directors. But none have yet taken this step.

The World Bank came closer than any IFI to releasing staff recommendations about pending projects, and has begun a pilot project that may advance this concept. The Bank staff in 2004, obtained then-President James Wolfensohn’s support for a pilot project to experiment with simultaneous disclosure of the final staff memos about proposed projects, the Project Appraisal Document. The board decided not to go that far, however, but the pilot project ultimately approved permits an array of other “draft” materials to be released, dealing with broader policy deliberations.

Element Five: Post-Approval Disclosure of Project Information

Several IFIs publish, after board approval of a project, information about the staff recommendations on the project.

The World Bank releases “staff appraisal reports,” after approval, with certain confidentiality possibilities. The ADB will release the Report and Recommendation to the President (RRP) for all public projects and will do the same for private sector projects, minus “confidential information and ADB’s assessment of project or transaction.” The AfDB issues the project Appraisal Report. The ADB also will be releasing a Project Administration Memorandum under its new policy.

More complicated are policies surrounding the release of legal and technical documents about projects.

Element Six: Project Monitoring and Evaluations

Regarding the subsequent evaluations of projects, IFIs prepare a wide range of monitoring and evaluation reports, not all of which get disclosed.

The ADB will require that environmental or social monitoring reports required for a loan should be made publicly available. Private sector sponsors shall make these available locally. Completion reports also will be public. The ADB also plans to make a list of its expected operations evaluations for the year publicly available in December of the preceding year.” More generally, the ADB says the project or program design should allow “for stakeholder feedback during implementation.”

The EBRD policy states: “For all categories of projects where significant environmental issues have been raised, or where the affected public is particularly interested, the EBRD will encourage or require Project Sponsors to commit to on-going public information and communication programmes. For example, the Bank may require the results of ongoing environmental monitoring to be made available to the public.” In addition, the EBRD, as part of the annual environmental reporting requirements to the Bank, “the Project Sponsors will be asked to provide a summary on the environmental status and implementation of project environmental requirements for publication on the Bank’s website, to be attached to the Project Summary Document for the project.”

At the IDB, a tranche release document is released. This document is a Bank-prepared “report on compliance with contractual conditions precedent to the release of tranches of policy-based and emergency loans.” This is disclosed “(a) after the release of the tranche concerned has been approved by Bank management, and after the Board of Executive Directors has been duly informed of such approval or (b) if a waiver of tranche release conditions is required, after such waiver has been approved by the Board of Executive Directors.” However, in Section III.D.2, the Policy states that “Tranche Release Documents… shall not be made available to the public if the borrowing member country concerned objects to such disclosure.”

At the World Bank, tranche release memos also are released that pertain to structural or sectoral adjustment loans. These documents are disclosed after board approval and with the consent of the borrowing country. Confidential or sensitive information is removed and put in the Memorandum to the President.

Element Seven: Disclosure Relating to Broad Policy Reviews

Most IFIs release final documents embodying decisions on policies regarding specific countries, sectors or broad policy themes. The frontier in this regard concerns the degree of openness surrounding the preparation of these policies, particularly via the disclosure of “draft” policies for public comment, and any subsequent “near final” versions as submitted to the boards for approval. Many institutions’ policies encourage releases, but retain an optional feature.

Perhaps the best standard on releasing draft policies was just approved for the ADB, and goes into effect this fall. Stressing proactive communication, the ADB policy calls for the assessment studies used in preparation for country strategies and program documents to be made available in-country to stakeholders in draft form if they are developed in consultations with nongovernmental stakeholders. ADB draft strategies and programs are to be available to in-country stakeholders for comment before consultations. As for new safeguard policies, and sector or thematic strategies, the ADB promises to make at least one draft available for consultation. The ADB also plans to prepare an advance list of new strategies and policies to be considered in the upcoming 12 months.

The African Development Bank led the way in this area in 2004 when it determined that draft Country Strategy Papers will be released to in-country target audiences, as part of the consultation process, to enhance information for CSP consultation. Such drafts will however exclude confidential information as agreed with the government. The AfDB also decided that “Draft policy papers will be released through the Internet and the Bank website at least 50 days prior to formal Board discussion.”

The EBRD releases drafts of proposed “sectoral strategies.” Such documents are disclosed before final approval by the Board of Directors and after endorsement by the Bank’s Executive Committee and following a preliminary issues-oriented discussion at the Financial and Operations Policies Committee (FOPC) of the Board of Directors. However, for medium- and long-range strategies, disclosure is not mandated, but may take place on a case-by-case basis.

Element Eight: Agendas

IFIs are establishing more sophisticated and complete advance notice systems about matters to be brought before the board.

The ADB policy calls for a number of such disclosures. It pledges to “make publicly available on a rolling basis a list of strategies and programs scheduled for preparation over the course of the next years.” Similarly, the ADB will make available a tentative schedule and the topics of board discussions for the forthcoming three weeks on a rolling basis.

The IDB decided to release the agenda for board meetings at the same time it is sent to the directors, joining the International Monetary Fund in this practice. The IDB also has agreed to release its annual and its quarterly work programs, a practice followed several other development banks.

The AfDB requires the disclosure of “the Board’s rolling monthly agenda.”

Element Nine: Minutes

The Inter-American Development Bank in late 2003 agreed to publish the minutes of its executive board meetings, the first development bank to do so. The disclosure of minutes was the main advance made as the IDB board revised its entire disclosure policy. The IDB publishes board agendas at the same time they are given to the Board of Executive Directors, and to release board minutes within 60 days after their approval by the board. As is the case throughout the policy, deletions will be permitted if the material is “deemed by the Board as too sensitive for public distribution….” The new policy does not define “sensitive,” although that word is used frequently when provision is made for redactions. The bank does agree in its new policy to identify when such deletions have been made. The release of minutes does not necessarily imply that a record of board votes will be available in those fairly rare instances when votes are taken. The minutes would include information on votes only if a member country specifically asks to record its position in the minutes.

The World Bank board in early 2005 approved the release of its minutes, but whatever the symbolic value of the gesture, the information value of the document may be limited. The minutes are quite spare: listing those attending, the presenter and “broad” subject of any briefings, titles of papers discussed, a summary of the agreements and decisions reached, and the names of executive directors abstaining or objecting. Transcripts and summaries are not to be released; nor will board committee minutes or their reports to the Board, known as green sheets. Also, the proposed policy on minutes will exempt “executive sessions,” and permit deletion of material “too sensitive for public distribution.”

The ADB also has agreed to release minutes, within 30 days of the meeting, and in a step ahead, has determined to disclose a “chairman’s summary of board discussions relating to safeguard policies, operational policies, and sector and thematic strategies.

Element 10: Disclosure Policies

No clear standout exists with regard to the overall way in which disclosure policy is structured and administered.

Several IFIs establish a “presumption” of disclosure as an official policy. The ADB, for example, states, “In the absence of a compelling reason for confidentiality, there shall be a presumption in favor of disclosure of information.” However, for most IFIs this presumption is hemmed in by a variety of specific rules governing particular documents, but less clarity for documents not specifically mentioned. The presumptions are not accompanied by standards with which to determine whether to disclose documents not covered by specific rules. The ADB’s new policy comes closest to laying out such specific exceptions.

Most institutions provide a contact for ordering publications, but making requests for other materials is less clear. Only the ADB and the EIB promise written responses. The EIB promises answers in two months.

As for making appeals of denied requests, the ADB will establish an internal Compliance Review Panel. The EIB appeals mechanism is the EU ombudsman, and officials recently said they plan to create an alternate system for use by non-EU nationals.

IFIs mostly follow a 20-year standard for the release of historical materials. The World Bank standard is 20 years, but added a new wrinkle — it now uses 5 years for materials that would be released because of recent changes to its disclosure policy. The IMF discloses board minutes more than 10 years old.

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).
Contact: freeinfo@gwu.edu or
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