Home » Posts tagged 'World Bank' (Page 2)

Tag Archives: World Bank

भारत में जलविद्युत विकास को बड़े पैमाने पर बढ़ावा

इस सेक्टर में निजी क्षत्रे को आकर्षित करने के लिए सरकार ने 2016 में इस पर चर्चा शुरू की कि नवीकरणीय ऊर्जा के क्षत्रे को और विस्तृत किया जाए ताकि 25 मेगावाट क्षमता से अधिक के जलविद्युत स्टेशन भी उसमें शामिल किए जा सके। इससे सरकार को 2022 तक 175 मेगावाट नवीकरणीय ऊर्जा उत्पादित करने के लक्ष्य को हासिल करने में मदद मिलेगी।

Big Push for the Development of Hydropower in India

It is noteworthy that currently, coal-based power projects are under threat due to lack of coal linkages and power purchase agreements, thus stalling many existing power projects and discouraging many companies from expanding to new coal power projects. This would give a boost to hydropower projects in many regions, especially in the Himalayan regions.

The Role of IFIs in the Development Agenda

Ulka Mahajan on the Context of the Role of IFIs in the Development Agenda

MASS welcomes the US Supreme Court’s Decision to Hear the Case Challenging World Bank Group Immunity

For immediate release

MAAS welcomes the US Supreme Court’s Decision to Hear the Case Challenging World Bank Group Immunity
This will be the first time the US Supreme Court will address the scope of international organisations’ immunity.
May 21, 2018, Mundra, Gujarat: Machimar Adhikar Sangharsh Sangathan (MASS) and the affected communities by the Tata Mundra Ultra Mega Project welcomes the historic decision of the US supreme court to hear the landmark lawsuit which challenged the immunity of powerful institutions like the International Finance Corporation (IFC), the private lending arm of the World Bank Group.
“This is a victory of our relentless struggle to bring to justice the crimes committed by the Tata against the fishing community. The IFC aided the process by turning a blind eye to it,” said Dr Bharat Patel General Secretary, Machimar Adhikar Sangharsh Sangathan, one of the petitioners in the case.
The case, Jam v. IFC, brought by fishermen and farmers affected by IFC-funded Tata’s Mundra Ultra Mega Project challenged the absolute immunity enjoyed so far by international organisations like IFC.
“International organizations like the IFC are not above the law and must be held accountable when their projects harm communities. The notion of ‘absolute immunity’ is inconsistent with Supreme Court precedent, and it is contrary to the IFC’s own mission as an anti-poverty institution. We are glad the Supreme Court has agreed to hear this case and hope it will correct this error,” said Richard Herz, Senior Litigation Attorney at EarthRights International (ERI).
The Supreme Court’s decision to hear their case means that it will consider international organisation immunity for the first time, and decide whether international organisations can be held accountable for their harmful conduct, or whether they enjoy the special status above the law that they claim.
Budha Jam, the main petitioner, said that “This decision on this case will be keenly awaited by not only by us but by the communities from across the world which are fighting the crimes of the international financial institutions in the name of promoting development. I am hopeful that the US Supreme Court will not let us down.”
International organisations like the IFC have long claimed they are entitled to “absolute” immunity from suit – an immunity far greater than any person, government, or entity enjoys – no matter how illegal their actions are or how much harm they cause.
“It is the time to start holding international financial institutions accountable. In this time and age when the human rights and accountability discourse has travelled far and wide, hiding behind the immunity clause is contrary to the “right to seeking justice” and “rights to remedy” of the communities,” added Patel.
Last year, the U.S. Court of Appeals for the D.C. Circuit ruled that IFC had “absolute immunity” and could not be sued for its role in the controversial Tata Mundra coal-fired power plant that has devastated communities in Gujarat. The D.C. Circuit recognised the “dismal” situation the plant has created for the complainants, including the destruction of their livelihoods and property and the serious threats to their health, and noted that the IFC had not denied those harms. The court found the IFC could not be sued based on prior D.C. Circuit decisions. One of the judges, however, expressed strong disagreement with IFC immunity and noted that another federal court had rejected the prior D.C. Circuit immunity cases, which she thought were “wrongly decided.”
“When at a time we thought that all doors for justice seemed closed, with this decision our faith in the judicial system is restored,” said Gajendrasinh Jadeja, head of a local village that is also a petitioner in the case.
Dr Bharat Patel (Mundra, Gujarat)
General Secretary, Machimar Adhikar Sangharsh Sangathan
+ 91 94264 69803

Huge Overlap in Investments by MDBs, ExIM Banks, and Bilaterals on Critical Sectors

By Joe Athialy

Ever since the first lending from World Bank in 1949 worth $34 million to Indian Railways and the bilateral credit India received from the erstwhile USSR and USA in the early 50s, India has been a recipient of significant funds from different multilateral and bilateral sources.

While each of these lendings came with baggage, and often conditionalities, much of it was justified in the name of nation-building, and critiques of the enormous social, environmental and even economic costs were shut their mouth by the oft-repeated rhetoric of ‘somebody has to sacrifice for greater common good’. This was true not just for lending from international sources, but any investments.

What the Multilateral Development Banks (MDBs) brought, along with its lending, was a host of policy changes in almost all critical sectors. They often influenced and changed the course of development agenda of the country, by providing ‘Technical Assistance’ to governments, being the knowledge provider and taking the role of a development finance gatekeeper with their Doing Business Reports, Investment Climate Reports and many such.

With India opening up her economy in 1991, India has been a destination of many foreign corporations and by late 90s, with all systems in place for their smooth landing, they started pouring, starting with companies like Enron and Cogentrix. With the foreign corporations, came in financial institutions, both private banks as well as Export-Import Banks (ExIm Banks). Some of the institutions operating here in the past have deepened their operations. What was witnessing the past decade or so is an influx of these investments majorly in energy, transport, steel, dams, roads, urban projects, industrial zones/corridors, smart cities and other mega projects. The number of financial sources coming in, the pace in which these investments are finalised and the quantum of money pouring in is alarming and often do not give the opportunity to see the investments in toto.

There have been many struggles – small and big – against these investments and the devastation, which caused to the people – their livelihood and natural resources, and the environment. While the yardstick of measuring the successes and failures of these struggles could vary depending on who does it, the reality remains that the struggles have forced MDBs to relook the way they conduct business in this country, compelled them to adopt safeguard policies and compliance mechanisms and didn’t shy away from confronting them on the ground, on the streets and even at their doorsteps.

The Indian government, for past few decades, has stressed the need for large infrastructural projects for the country’s development and these projects are being seen as a stimulus to the growth of India’s GDP. This aggressive growth comes at the cost of displacing the lives of people who are dependent on land and natural resources for their livelihood and devastating the environment. This also often comes at the expense of displacing existing dwelling communities who are pushed to a life of poverty and whose life and livelihood cannot be commensurably compensated by money – in most cases, not even that.

This document is an effort to compile data of investments coming into India from MDBs, ExIm banks and other bilateral investments, to help understand the landscape of financing from these institutions and helping to understand the overlaps of international financial institutions in certain key sectors.

The data provided in this document is not comprehensive. While information from MDBs is comparatively easy to access, that of ExIms and bi-lateral sources are difficult to compile. Despite our best efforts, there are many we missed. We will keep this as a work in progress and will update the data as and when we get it.

We hope that this data and the broader understanding this document may help provide will strengthen the struggles on the ground as well as critical voices demanding transparency and accountability in financial institutions.



Letter to the WB on Amaravati Case of Inspection Panel


November 27, 2017

Letter to the WB on Amaravati Case of Inspection Panel


The Executive Directors,

The World Bank

Washington DC

Dear Executive Directors,

We, the representatives of people’s movements, civil society organisations, and concerned citizens, write to the Board of World Bank Group to draw your urgent attention to a few critical matters surrounding the Bank’s proposed Project PI59808: India- Proposed Amaravati Sustainable Capital City Development Project. We are aware that complaints and requests for inspection were sent to the Inspection Panel during December 2016 and May 2017,[1] and registration of the complaint was notified to the public (IPN-Request No. RQ 17/04).

Developments following the Inspection Panel’s visit

We are perturbed with the couple of recent developments, which took place after the Panel’s visit to India mid-September this year, following the registration of the complaint filed by farmers from Andhra Pradesh. This project has garnered much attention in the country owing to the massive land acquisition and ‘voluntary land pooling’ scheme [LPS]. The farmers allege harm to their livelihoods, environment, and food security, along with lack of consultation and participation of affected people. The Inspection Panel visited Amaravati during 13-15 September 2017 and has heard various representations from the project-affected villages. Soon after, in the first week of October, the Bank’s website published the Inspection Panel’s report — which was taken down within few days — with recommendations for investigation into the grievances of the complainants against forced land pooling, coercion and intimidation, lack of sufficient public consultations, grave threat to food security and loss of fertile floodplains to establish Amaravati. It is established from the copy of the report that the Panel has in fact concluded that there are indeed “issues of potential harm and policy non-compliance.” We note that it has further observed that the people “raised issues of a serious character that can only be fully ascertained in the context of an investigation.” It also recommends “carrying out an investigation,” which “will primarily focus on the resettlement aspects of the Bank’s proposed project, as well as environmental concerns, and issues related to consultation, participation and disclosure of information as they pertain to the Bank’s financing, policies and procedures.”

The Bank, while pulling down this report, issued a press statement saying that the Panel’s report was inadvertently published before being reviewed by the Bank’s Board of Executive Directors. All the affected groups, the communities, supportive CSOs and media are now watching Board’s decision closely, which will decide on the further investigation into Bank’s non-compliance with its operating policies [OP/BP 4.01 – Environmental Assessment, OP/BP 4.04 – Natural Habitats, OP/BP 4.11 – Physical Cultural Resources, OP/BP 4.12 – Involuntary Resettlement, OP/BP 4.36 – Forests].

Undermining of Panel’s mandate

While you are now considering revising the directives of your accountability mechanism by next year, we keenly call forth to bolster the mandate of the Panel and not to weaken it. Earlier this year, there were calls by the CSOs for greater ‘independence’ and ‘legitimacy’ of the Panel by including external stakeholders in its Panel, which could be from the academia or CSOs. Not to deviate from the point of attention here, there are regular calls about strengthening your accountability, but your actions seem to weaken your mandate by limiting the role of your complaint handling mechanisms. This, in turn, reflects your undermining of the systems and responsibilities you uphold. Especially, now that the international climate has been manipulatively made conducive for development banks and lenders to thrust funds in the guise of mega infrastructure financing, it is likely that you would witness a large number of objections as well since it involves significant displacement of people, loss of natural resources and livelihoods. Disregard of national and state laws, violation of environmental and social safeguards and hiding of critical information to affected communities continue unchecked.

There are strong reasons to suspect that the Government of India might weigh in on the Board to dissuade it from permitting an investigation into the case. We want to confirm that that view is not shared by a large number of us, and the Government is going ahead against the wishes of the people.

The independence of the Inspection Panel and the commitment of the Board on following its procedures will be strongly tested once the Panel’s report is published on the Bank website again.

Intimidation of the State 

Though the Government of Andhra Pradesh [GoAP] presented Land Pooling Scheme as voluntary, many farmers were intimidated and economically manipulated into pooling their lands. The strategies for the same included setting short deadlines for participation in the LPS, which were subsequently and repeatedly extended; threats to acquire the land under the regulations of the Land Acquisition Act of 2013, which would provide compensation far below the actual market value of the farmers’ land and threats to provide the ten-year annuity only to those farmers who signed up for the LPS prior to May 1, 2015.

Farmers who expressed opposition to the LPS were also intimidated and harassed. There were instances of burning of farms and plantations in the State. Further, there has been a heavy police presence in the Amaravati area since land pooling began, and police have interrogated, detained, harassed, assaulted, and intimidated residents. The Chief Minister of the State, who publicly challenged to take legal action against the people working against the capital city, has set a dangerous precedent to the effectiveness of accountability mechanisms of development banks. The intimidating atmosphere around any public workshop or meeting held by those who are not in favour of the capital city project is very clearly established in the IP report and as was evident during their visit to Amaravati as well.

We are astonished that the Bank has not made a public statement against this outright intimidation for seeking redressal from its accountability mechanism. Apart from a direct threat to the current complainants, it is also a warning to all future complainants that they will have to face the wrath of the state for approaching the Bank and its mechanisms. The silence the Bank continues to maintain on this is perceived to be a tactical one to appease the Indian government.

Precautionary Orders of NGT Judgment 

In its recent (17th November 2017) decision, the Principal Bench of National Green Tribunal (in Pandaleneni Srimannarayana, EAS Sarma and others, vs. State of Andhra Pradesh and Ors.) has categorically held that the proposed Capital’s environmental and social impacts have been insufficiently reviewed and addressed when the controversial environmental clearance was accorded to it. As a consequence, the Tribunal thought it fit to appoint a special Supervisory Committee to review all conditions of the environmental clearance accorded by the State Environment Impact Assessment Authority, and also to subject the project to further review from a perspective of assessing risks, including those posed by climate change events. It is clear from this verdict that even the most basic assessments relating to the short-term and long-term environmental and social impacts of the project have not been assessed per law and applicable norms by the Andhra Pradesh Government.

All things considered, no project can be supported or financed if it is not in conformance with the Constitution of India. It is an undeniable fact that the Amaravati Capital proposal has not yet been reviewed and approved by the District Planning Committee [DPC] as is mandated per Article 243ZD of the Constitution of India, which requires such a project as the Capital Amaravati can only be promoted, provided it has been approved by the DPC having prepared a District Development Plan having regard to:

“(i) matters of common interest between the Panchayats and the Municipalities including spatial planning, sharing of water and other physical and natural resources, the integrated development of infrastructure and environmental conservation;

(ii) the extent and type of available resources whether financial or otherwise;

(b) consult such institutions and organisations as the Governor may, by order, specify.

(4) The Chairperson of every District Planning Committee shall forward the development plan, as recommended by such Committee, to the Government of the State.”

In the instant case, without Amravati having secured mandatory approval of DPC, it follows that extending any form of loan and assistance to the proposal will amount to the World Bank supporting, financing and participating in an unconstitutional project.

Our Demands against the Impositions of the WB as a co-financier in Amaravati Capital City Development Project

  1. We strongly hold the World Bank and Asian Infrastructure Investment Bank (AIIB), a co-financier of the project, accountable for the already existing and impending crucial consequences of this mammoth capital city project with its flawed project design, based on its own environmental and social safeguards.
  2. Despite repeated communication and appeals, the GoAP has already proceeded with construction activities and laying out infrastructure in an accelerated mechanism, involving sub-projects and components, which highly falls in the purview of the Bank’s scope – its Urban Pro-Poor Infrastructure goal for the project. This is a very disturbing trend of the WB for proceeding with support for the government without paying heed to the resistances of the project affected communities and circumventing their concerns against the project. Also, as understood from the World Bank’s statement, it has executed a trust fund of $ 0.17 million for financing the preparatory works of the project.
  3. We do not hesitate to direct our charges against the WB on lending to the catastrophic project where we are witnessing now the forced Land Pooling Scheme to amass vast parcels of land for development across one of the richest fertile food belts of India [Please note that GoAP has proposed to acquire around 56,000 acres of which around 35,000 are already pooled in, including almost 100 hectares of Forest Land].
  4. We demand that WB revoke its support from the project, which would surely pave the way for the disruption of the natural state of a sensitive ecosystem including remodelling reserve forests by felling trees and building bio/industrial/techno/sports parks, along with your negligence towards our foresight of frequent floods triggered to an acute degree. We challenge that the Chief Minister of AP himself is flouting NGT orders on zero constructions on the river embankments, by renovating his residence on the banks adjacent to River Krishna.
  5. Displacement and ‘resettling’ of around 20,000 families in the guise of returning ‘developed’ residential and commercial lands in the absence of a guarantee and struggling in the tentacle grip of realtors, middlemen, goondas of the real estate sector are serious concerns raised.WB presenting a plan on involuntary resettlement against these issues without public consultations or consent is vehemently questionable.
  6. We strongly reiterate that the creation of Andhra Pradesh Capital Region Development Authority Act (APRCDA Act 2014) was against the country’s Land Acquisition Rehabilitation and Resettlement Act 2013 along with the tweaked amendments. We are aware that, as and when project components materialise, existing laws are amended at the State, or there is a complete irreverence to the nation-specific policies. We fiercely question this disregard of WB for our policies and laws, which were strenuously formulated by our national leaders during our times of national and regional struggles.
  7. The lack of an adequate and comprehensive Resettlement Policy Plan and the incompetent addressing of the Bank against the uprooting of impoverished Dalit families from 600-year-old occupied islands and not having guaranteed them return lands will lead directly to the creation of a wide marginalised community of informal sector on the outskirts of the capital city with no regard for their dignity, efforts and labour. Also, depriving village commons of the communities dependent on them is highly regrettable.
  8. We want to draw the attention of WB to the contemptuous promises made by the Government to upgrade skills of project affected people of which farmers are the majority, by wrenching their agricultural lands from them and introducing new ‘industrial and technological’ skills. The statistics of increase in land value, population and employment rates are highly speculated, and studies based on other references on recent capital cities of India affirm our case. We are resolute when we ask WB to reconsider stop investing in this project based on highly inflated statistics that are borrowed from the development models of foreign countries (Japan, Dubai, Singapore).
  9. We do not wish to sell our land to foreign players with diversified investments, MoUs and interests, in the name of ‘development’. GoAP, who should have been supporting the citizens who elected them, refrain from giving attention to our calls. We assert that we will continue exhorting WB for proceeding with this ill-conceived project, against the greater interests of the people in Amaravati.

We unwaveringly stress that the civil society of India is wary about how you will take a decision based on the recommendations of the Panel. We look forward to your immediate attention to our requirements and for your sound judgment on Amaravati case.


Thank you.

Yours sincerely,

  1. Medha Patkar, Narmada Bachao Andolan
  2. EAS Sarma, Forum for Better Visakha and Former Secretary, Ministry of Power, Government of India
  3. Prafulla Samanthra, Lok Shakti Abhiyan, Odisha
  4. Gautam Mody, New Trade Union Initiative
  5. Peter, National Fishworkers Forum
  6. Madhuresh Kumar, National Alliance of People’s Movements (NAPM), Delhi
  7. Afsar Jafri, Focus on Global South
  8. Sreedhar Ramamurthi, Environics Trust, New Delhi
  9. Ravi Rebbapragda, Samata Assertion for People
  10. Ashok Shrimali, Mines, Minerals & People
  11. Souparna Lahiri, All India Forum of Forest Movements (AIFFM)
  12. Xavier Dias, Editor, Khan Kaneej Aur ADHIKAR, (Mines Minerals & RIGHTS)
  13. Shripad Dharmadhikary, Manthan Adhyayan Kendra, Pune
  14. Himanshu Upadhyaya, Public Finance Public Accountability Collective, Bangalore
  15. Tani Alex, Centre for Financial Accountability, New Delhi
  16. Soumya Dutta,  Bharat Jan Vigyan Jatha
  17. Beyond Copenhagen Collective
  18. Willy, Indian Social Action Forum – INSAF, New Delhi
  19. Kalyani Menon-Sen, Independent Researcher and Activist
  20. Leo Saldanha, Environmental Support Group, Bangalore
  21. Ram Wangkheirakpam, Indigenous Perspectives, Manipur
  22. Himanshu Thakkar, South Asia Network on Dams, Rivers & People, Delhi
  23. Babu Rao, Retired Scientist, Indian Institute of Chemical Technology (IICT) and Independent Environmental Expert
  24. Usha Seethalakshmi, Independent Researcher, Mahila Kisan Manch (MAKAAM), Forum For Women Farmers’ Rights
  25. Meera Sanghamitra, National Alliance of People’s Movements (NAPM), Andhra Pradesh/Telangana State
  26. Kiran Kumar Vissa, Rythu Swarajya Vedika (Forum For Farmers’ Sovereignty)
  27. Ramakrishnam Raju, United Forum for Right to Information and National Alliance of People’s Movements (NAPM), Andhra Pradesh/Telangana State
  28. Deepala Suresh, Lawyer and Independent Researcher
  29. Gutta Rohit, Human Rights Forum (HRF), Andhra Pradesh/Telangana State
  30. Ravi Kumar, Independent Lawyer (representative of the Amaravati project-affected before various judicial fora)
  31. Rajesh Serupally, National Alliance of People’s Movements (NAPM), Andhra Pradesh/Telangana State
  32. Jeevan Kumar, Human Rights Forum (HRF), Andhra Pradesh/Telangana State
  33. Bharat Patel, Machimar Adhikaar Sangharsh Sangathan
  34. Awadhesh Kumar, Srijan Lokhit Samiti, Madhya Pradesh
  35. Rajendra Ravi, Institute for Democracy and Sustainability
  36. Bilal Khan, Ghar Bachao Ghar Banao Abhiyaan
  37. Manshi Asher, Himdhara – Environment Research and Action Collective, Himachal Pradesh
  38. Aashima Subberwal, The Research Collective, New Delhi
  39. Rajesh Singh, Delhi Solidarity Group
  40. Himanshu Damle, Public Finance Public Accountability Collective, New Delhi
  41. Vimalbhai, Mattu Jan Sangathan, Uttrakhand
  42. Rajkumar Sinha, Chutka Paramanu Virodhi Sangharsh Samiti, Madhya Pradesh
  43. Maglin Philomin, Teeradesa Mahila Vedi, Kerala
  44. Amulya Nidhi, Nai Shuruwat, Madhya Pradesh
  45. Kannan, PSI India
  46. Ravindranath, River Basin Friends


[1] http://documents.worldbank.org/curated/en/940131497624348120/India-Amaravati-Sustainable-Capital-City-Development-Project-request-for-inspection



IMF and World Bank: Marching to a G20 Tune?

By Nancy Alexander

This year, the G20 Finance Ministers and Central Bank Governors’ Meeting on October 12-13 overlapped with the IMF-World Bank annual meeting on October 13-15 in Washington, DC.

As of December 1, 2017, Argentina becomes G20 President with the past and future Presidents (Germany and Japan, respectively) as part of the G20 Troika.  At the October G20 meeting, Argentina announced that it’s two key G20 Finance Track priorities will be the Future of Work (shared with the Sherpa Track and possibly looking at automation, education, and womens’ entrepreneurship as well) and Infrastructure Financing, especially through financialising infrastructure as an asset class. The priorities of the Argentine Sherpa Track will be announced at the final German Sherpa Meeting on 9-10 November in Berlin.[1]

The individual G20 member countries hold the overwhelming majority of votesat the IMF and World Bank, so it is not surprising that G20 priorities are often identical to those of the institutions they dominate.  For example, infrastructure financing has been a G20 development theme since 2010 and a powerful Finance Track theme since 2014, except under Germany, when infrastructure issues were dealt with by the Sustainability Working Group and under the Compact with Africa.

Since 2010, the G20 has focused urging the Multilateral Development Banks to standardize, scale-up, and replicate mega-projects, especially public-private partnerships (PPPs) in emerging and developing countries.  Indeed, the G20 encouraged the strengthening of existing and start-up of new Project Preparation Facilities (PPFs) with the capability of accelerating mega-project preparation — especially for trade facilitation in the energy, water, transportation and ICT sectors.  In each geographical region and subregion, Master Plans for Infrastructure in these four sectors have already been designed.

Especially since 2014, the G20 has tried to solve the problem of how countries can attract private investors, particularly long-term institutional investors (pension and insurance and mutual funds and sovereign wealth funds) which hold over $100 trillion in savings. While the G20 and the MDBs have not succeeded in mobilizing much additional financing for PPPs from investors, efforts to overcome remaining obstacles are described in Boxes 1 and 2.[2]

Until the German Presidency, there was no effort to promote infrastructure that would be environmentally and socially sustainable.  Even under the German Presidency, the officials leading the powerful Finance Track said that sustainability is the job of the (less powerful) Sherpa track.  Infrastructure contributes approximately 60% of greenhouse gases (GHG) emitted to the atmosphere; therefore, it is crucial that urgent steps be taken to curtail infrastructure that locks-in carbon-intense technology and ensure that infrastructure meet criteria for mitigation of GHG and adaptation to the effects of global warming.  At present, all such criteria are voluntary whereas the rights of investors are legally protected in trade/investment agreements and the PPP contracts that include investment provisions.

  • At the 2014 Australian G20 Summit, the G20 Global Infrastructure Hub was launched to expand the project “pipeline” for preparation and financing.
  • Also, in 2014, the World Bank launched the Global Infrastructure Facility.  At the launch, Bank President Jim Kim stated “We have several trillions of dollars in assets represented today looking for long-term, sustainable and stable investments…In leveraging those resources, our partnership offers great promise for tackling the massive infrastructure deficit…”
  • In 2016, the World Bank’s private sector arm, the International Finance Corporation (IFC) launched its Managed Co-Lending Portfolio Program, a loan-syndications initiative that enables third-party investors to participate passively in IFC’s senior loan portfolio. The first partnership under the program was signed with the global insurance company Allianz. Under the agreement, Allianz intends to invest $500 million, which will be channeled into IFC debt financing for infrastructure projects in emerging markets.
  • 2016 was also the year when China launched the Asian Infrastructure Investment Bank (AIIB) and the BRICS (Brazil-Russia-India-China-South Africa) launched the New Development Bank (NDB).

Box 1: New infrastructure-related institutions

The G20 has directed each multilateral development bank to expand infrastructure financing for years, especially by “crowding in” the private sector. At the Hamburg G20 Summit in July, Leaders adopted principles to achieve this.[3]  These principles underpin the theme presented at the IMF/World Bank annual meetings — namely “Maximizing Finance for Development” (also known as the “Cascade” or “billions to trillions”). The October 14 Communique of the Development Committee emphasizes this theme, which is actually a relatively new paradigm for financing infrastructure.[4]The IMF and World Bank’s two papers[5]for the Development Committee meeting describe this paradigm and its implementation.

While the World Bank is tasked with expanding private investment in infrastructure, the IMF’s Infrastructure Policy Support Initiative provides tools to help countries assess the macroeconomic and financial implications of various investment programs and improve their institutional capacity.

The gist of the “Maximizing Finance for Development” paradigm is that nothing should be publicly financed if it can be commercially financed AND that if commercial financing is NOT forthcoming for a project, a country must promote a more investment-friendly environment and/or private sector guarantees, risk insurance and other inducements should be provided.  My blog criticizes the paradigm[6], which relies heavily on expanding the launch of PPPs, including by packaging them in portfolios for trading.

Figure 1: Maximizing Finance for Development (“the Cascade”). Creator: Jim Yong Kim, Speech at LSE 04/11/2017.

There are Cascade pilots in nine countries (Cameroon, Côte d’Ivoire, Egypt, Indonesia, Iraq, Jordan, Kenya, Nepal and Vietnam) which are intended to introduce private sector solutions in energy, transportation, and other infrastructure sectors. The pilots will gradually expand to include other sectors and countries.

The “Maximizing Finance for Development” paradigm responds to the G20 interest in attracting private investors, especially long-term institutional investors such as pension and insurance and mutual funds as well as sovereign wealth funds. As it is, OECD pension funds ($30 trillion) and insurance funds face staggering gaps and potential insolvency unless they can get higher yields on their savings.  Many long-term institutional investors, such as pension funds, will work with hedge funds and private equity funds to deploy their assets under management (AUM) in infrastructure portfolios for these higher yields.

The idea of this paradigm is for the public sector to take high risks at the early stages of project identification, design and construction and the long-term investors to take a revenue stream over 20 or 30 years. To counter this agenda, a Global Campaign Manifesto on PPPswas launched by 152 national, regional and international civil society organisations, trade unions and citizens’ organisations from 45 countries to “sound the alarm on dangerous PPPs.

Megaprojects and PPPs are not inherently dangerous, but when their design fails to produce adequate social and environmental co-benefits and heap risk on governments, they become so.  When risk is heaped onto governments, PPPs tend to increase inequality by privatizing gains and socializinglosses. The World Bank “Guidance on PPP Contractual Provisions” proves how heavily the World Bank proposes heaping risk on governments as well as introducing “stabilization” procedures that would inhibit the right to regulate/legislate in the public interest.  Motoko Aizawa summarizes key critical pointson the Guidance and links to the legal analysisof the Guidance by the firm Foley Hoag. Despite major problems with the “Guidance” – it will be launched in Cape Town, Kuala Lumpur, and possibly Abidjan — unless the process is stopped in order to radically revise it.

In Africa, the “Compact with Africa” report by the Africa Development Bank, World Bank, and IMF (March 2017, Baden Baden) describes how public utilities would be taken “off balance sheet” and user fees and domestic resources would be mobilized, along with aid, to shoulder public risks and, meanwhile, development banks would offer guarantees and liquidity facilities to offset risks to the private sector.

The heavy policy conditionalities proposed by the G7/G20 for each African country participating in the “Compact” include requirements that governments use the World Bank’s “Guidance on PPP Contractual Provisions” which would impose enormous risks on governments while hobbling their capacity to protect the public interest.  The conditions also require that governments develop Systematic Investor Response Mechanisms (SIRMs) to satisfy investor grievances before they reach international tribunals (Investor-State Dispute Settlement).  Concerns for investors are not matched by concerns for citizens who often lack even basic information about the development of projects that will affect their lives.

In light of the heavier push for financialising infrastructure, we have a recent NEPAD announcement which calls for African asset owners to raise the percentage of assets under management for infrastructure from 1.5% to 5%. This strategy is aggressively promoted by Africa’s Continental Business Network (CBN), which issued a communique in September calling for the adoption of this strategy at the AU Summit in January 2018 with a roadmap presented to the African Finance Ministers meeting in March 2018 as well as the G7 and G20 Summits later in the year.

Box 2: G20 compact with Africa

The G20 will measure the performance of each MDB by the extent to which it leverages private investment[7]and, in turn, the MDBs will measure the performance of many countries by how effectively they leverage private investment.

In conclusion, the “Maximizing Finance for Development” approach would create greater reliance on commercial financing and reduce the need for World Bank lending to governments, as would the Trump/Mnuchin push to reduce World Bank lending operations to creditworthy countries (See FT 10/13/17 “US Demands China loan rethink as condition of World Bank cash”). If these approaches are implemented, the World Bank could shrink as the Asian Infrastructure Investment Bank (and others) expand. Potentially the finance available for public goods (stable finance, sustainable development and climate goals, urban infrastructure such as sanitation…) would become even more scarce. Privatization and deregulation would give market players, even the predators, freer rein.

[1]At the final German Sherpa meeting on November 9-10 in Berlin, the Argentine Sherpa will announce the priorities for the 2018 Presidency.  The Germans have chosen 7 topics for this meeting: 1) a review of outcomes of the Hamburg Summit (Trade, Migration, Anti-Corruption, Terrorism, and Digitalization); 2) the Climate and Energy Action Plan; 3) the Global Forum on Steel Excess Capacity; 4) Main Outcomes of the Finance Trade, including the Compact with Africa; 5) G20 Governance; 6) We-Fi/Business Women Leaders’ Taskforce; and 7) Health.
[2]For descriptions of financialization, see an article by Nick Hildyard of Corner House and a blog by the World Bank Group’s Chief Financial Officer.
[4]Communique of the Development Committee, IMF and World Bank, October 14, 2017.
[6]N. Alexander, “Beware the Cascade,” JustGovernance, Boell Blog
[7]See Annex 2 of the Hamburg Principles and the report of the Global Infrastructure Hub to the G20 Finance Deputies.   These two documents established the metrics for the first Joint Report of the MDBs on mobilizing private finance. This sets up a competition among the MDBs in terms of their efficiency and modalities for mobilizing private finance, in general, and for infrastructure, in particular.
Nancy Alexander is the Program Director, Economic Governance & G20 at the Heinrich-Böll-Stiftung North America.
The analysis first appeared here.