Rep. Frank Urges World Bank to Make Transparency Reforms

11 September 2009

US Congressman Barney Frank (D-Mass.) said September 10 that the World Bank should improve its disclosure policy and remove the anti-labor bias from its Doing Business report or else risk reduced US funding.

Franks message was delivered at a hearing of the House Financial Services Committee at which academics and other witnesses advocated for greater transparency at the Bank. Frank, who chairs the panel, pointedly noted that decisions would be made next year about the size of US capital allotment for the Bank. We will not be voting more money unless there are changes, Frank stressed.

The chairman was particularly blunt about the Banks recently issued annual report on business conditions worldwide, Doing Business 2010, which surveyed and ranked 183 countries on their regulatory environments and other factors affecting business.

Frank called it a profoundly misguided and reactionary document that gives better ratings to countries with weaker labor standards. He pledged to hold a hearing by the end of the year, saying, We are more serious about making changes to the Doing Business report than they seem to realize.

The chairman said US oversight of Bank operations should not be the sole province of the Treasury Department and suggested more reliance on the State Department.

Kicking off the hearing, Frank stressed the value of greater openness at the Bank, arguing that public participation enhances decision-making, improves outcomes, and impedes corruption. A webcast and the witnesses statements are available at the committee website.

Strongly agreeing with Frank, Nobel Prize-winning economist Joseph Stiglitz, formerly the Banks chief economist and now a Columbia University professor, testified, We should require the World Bank to adopt a standard that is at least as good as the Freedom of Information Act, referring to the US law.

Stiglitz further emphasized that commercial contracts between governments and oil and mining companies should be fully disclosed. It makes little sense for the World Bank to be putting money into a country if that country is pouring money out in sweetheart deals with mining and oil companies, but without transparency, who can tell whether that is being done.

Unlike other forms of conditionality, Stiglitz wrote in his testimony, the transparency conditionality will strengthen democratic processes.

In his testimony Stiglitz also criticized the secrecy around the construction of the Country Policy and Institutional Assessment (CPIA) indicators that the Bank uses to allocate aid, saying that preliminary research is finding that the CPIA is not providing better forecasts of future growth performance than publicly available information. There is no justification for keeping the details of their construction under wraps. He criticized the Doing Business report, too, concluding that debate on World Bank policies can only occur if there is openness and transparency.

Executive Director of the Policy and Global Affairs, Division at the National Academy of Science Richard Bissell, testifying as a board member of the Bank Information Center and for several other organizations, laid out concerns about the Banks existing disclosure policy and the proposed changes. He praised elements of the Banks proposed revision of disclosure policyan ongoing effort nearing the stage of a final proposal and expected adoption this fall. Bissell, former director of the World Bank Inspection Panel, applauded the draft for including a truer presumption of disclosure, a better request and appeals system, improved disclosure of implementation information, release of draft documents, and disclosure of summaries of board meetings.

However, Bissell also stressed several continuing concerns.

He said the formal statements by executive directors should be released and said 10 years was too long to wait for release of transcripts of the meetings and the directors statement. He urged a pilot project of open meetings.

The proposed exemptions give too much leeway to governments and contractors to block the release of information, he testified. He suggested that the Inspection Panel be use as an appeals mechanism for disputes about the disclosure policy.

Bissell further urged more translation of documents, active promotion of information, provision of adequate resources to support transparency, and Bank leadership in advocating reform of disclosure policies at other multilateral development banks.

Alnoor Ebrahim, an associate professor at Harvard University Business School, stressed that the Bank as a public institution must be accountable to the people it is supposed to serve. He encouraged using staff performance evaluations to reinforce adherence to disclosure standards. Noting that some borrowing governments oppose more openness, he said sunshine on board deliberations might help.

His testimony evaluates issues surrounding public participation and the Bank, concluding that a sense of exclusion among stakeholders around project development is aggravated by a disclosure policy that makes much information available only after key decisions have been made.

Ebrahim suggested mandatory standards for public participation and improving the transparency of governance and operations. He advocated more Bank promotion of oversight by national parliaments.

Vijaya Ramachandran, senior fellow at the Center for Global Development, said that existing incentives for staff to send as much money out the door as possible reduce the likelihood that the staff will admit when a project is going wrong or stop a project before it is completed.

She also stressed that the Bank should engage third parties to conduct evaluations and should diversify its product mix and move it away from the culture of lending.

National Security Archive Director Thomas Blanton, citing history of past disclosure reforms, emphasized that congressional pressure has been essential for every reform. According to his testimony, The bottom line is that real reform depends on four factors coming together: pressure from outside critics, pressure from Congress, rhetorical commitments by the Bank, and inside reformers who internalize the need for transparency.


By Toby McIntosh

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Filed under: 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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