CSOs advance development effectiveness agenda in WB-IMF meetings amid shrinking civic spaces and global tensions

October 19, 2018

 

A repertoire of CPDE’s participation at the 2018 World Bank-International Monetary Fund Annual Meetings and related events

 

 

BALI, Indonesia-- The International Monetary Fund-World Bank Group Annual Meetings (AM) is the largest gathering of Central Bank governors and Finance Ministers from all over the world. The 2018 edition of the meeting was held from October 8 to 14 in the paradise island of Bali, Indonesia, amid the IMF-WB’s fight for relevance in the current political disorder and economic turmoil.

 

For civil society organisations (CSOs), this meeting is an opportunity to raise global issues such as the world economic outlook, global financial stability, poverty, aid and climate change. As CSOs remain vigilant in Bali, the AM becomes an arena to challenge development models espoused by international financial institutions (IFIs) vis-à-vis people-centered development. 

 

Consensus on the uncertainties   

 

Even the economic managers in the Annual Meetings were unable to deny the volatility of the global situation. It was the IMF’s own Global Financial Stability Report that recognised “an intensification of concerns about emerging markets, a broader rise in trade tensions, the realisation of political and policy uncertainty."

 

The high-level meetings included the gathering of the most influential developing countries in the World Bank and IMF, the G24. In their communiqué, the intergovernmental grouping states that they “are concerned with the uncertainty from the trade tensions and protectionist sentiments that further cloud our growth outlook.” Apart from that, the G24 meeting was plagued by geopolitical tensions as developed countries and the emerging markets struggle to withstand the impending risks.

 

Historically, the IMF is in charge of the regulation of currency exchange rates and facilitation of loans while the World Bank after the rehabilitation of Europe from the last world war became the go-to lending institution of developing countries.

 

However, both the Fund and Bank remain influential in development policy arena and precisely the point that CSOs need to constantly engaged them.

 

The WB’s direct support to the private sector is support for transnational corporations alone which benefit greatly from their projects. According to People Over Profit, from 2008 to 2017, foreign transnational and multinational corporations with sizeable operations in developing countries bagged the most lucrative World Bank-funded contracts in the top 10 borrower countries, excluding India and China. This is the trend in many developing countries wherein contracts for megaprojects are bagged by big foreign corporations that have the capital, technology, knowledge, manpower, and network.

 

At the core of the IMF-WB understanding of development is ultimately a private sector-led development focused with economic growth and “continued use of the private finance as the main source of funds for development and delivering public goods. Private finance are investments driven by corporations that do not directly translate to the goals of sustainable economic development. Corporate interests good’’ governance measures synonymous to deregulation and privatisation of services and liberalisation of trade.  It is relevant to note that the private sector thrived in the 1980s through IMF-WB’s structural adjustment programs (SAP) where indebted developing countries are leveraged to implement deregulation and liberalization in trade and investment. From these, there has been little, if not, lack of accountability from the IMF-WB on the impacts of their policies.

 

MFD, private sector, and corporate capture of development

 

The agenda in Bali centered on the new approach they call Maximising Finance for Development (MFD). This so-called “new” method aims at expanding the role for the private sector in development. This, together with other neoliberal tools and initiatives, reinforces the corporate capture of development. With the need to meet financing needs, these IFIs turn to corporations especially in infrastructure via influx of foreign capital, more public-private partnerships (PPPs) and government reforms conducive to investors.

The MFD “asks poor countries to use scarce fiscal resources and/or official aid to ‘de-risk’ bankable projects, by for instance providing guarantees/subsidies for demand risk or political risk. Since the WB will retain a share of the junior tranche, poor countries may easily be pressured to keep up de-risking payments or guarantees, even if it means cutting essential social spending.”[ii] [Office10] This is only an intensification of private provision of public goods.  Worse, this is packaged as a strategy for achieving the Sustainable Development Goals (SDG).

 

CSO Partnership for Development Effectiveness (CPDE), a global CSO platform working on effective development cooperation, has been wary of the are geared towards the maximisation of profits, with only minimal and indirect benefits for poverty eradication.

 

In the Civil Society Policy Forum (CSPF) of the Annual Meetings, CPDE hosted one of the discussions focusing on effective development cooperation principles in private sector development financing. Spaces to talk about this are relevant especially when the official development assistance (ODA) is now instrumentalized to attract private finance while blending public and private resources for development is the way to go to meet the financing requirements. Recurring themes from the discussion can be summarised into four points: 

 

1. There is a trend of selling-off of public responsibilities to corporations by governments. Conditions set by the IMF-WB, including relaxing economic policies to accommodate private investments, lifting tax and tariff barriers, and changing charters, facilitate an enabling environment for increased participation of the private sector in the name of ‘development.’ These result to state responsibilities being devolved to the hands of the private sector, which makes private profit out of public goods and needs.

 

 2. IFIs heavily influence development policies and insist free-market, corporate-led economic and development framework. This often leads to public goods and services become unreliable, and countries become dependent on unpredictable sources of financing and prone to profiteering. Guarantees given to investors also eat up government budgets for health, transport, energy, and thus hamper the ability to pursue public investment;

 

3. The use of private finance must abide by the highest standard of transparency and accountability to affect positive change to attaining the SDGs. There are existing norms and mechanisms in making the private sector accountable, however, these remain weak and lacking. Systems must be in place to ensure that these financing modalities are: (a) aligned to democratically-agreed national development strategies; (b) fully transparent and accountable; and, (c) in full compliance with international human rights and environmental standards;

 

4. Finally, the private sector in development needs to be aligned with the effective development co-operation (EDC) principles and apply international transparency and accountability norms in their operations. In a review of bilateral donor strategies on growth and the private sector from a CPDE paper, CSOs found that donors rarely reference aid effectiveness principles. That is, according to the paper, scarce attention is given to: “democratic country ownership, donor alignment and harmonization, transparency and accountability, women’s empowerment and results.”

 

Shrinking spaces and efforts to silence CSOs in Bali

 

CSOs from around the world were also present to participate in the Annual Meetings and independently organised events such as the Peoples’ Global Conference against IMF-WBG (PGC). However, tensions were high as harassments and despicable maneuvers were employed by local Indonesian authorities to foil the PGC and to curtail civil society from exercising their rights.

 

In a statement released by CPDE, reports of international CSO delegates and locals being harassed have been widely condemned. The attempt to silence the CSO community escalated to authorities intimidating owners of local venues which led to the cancellation of a PGC open space where CPDE was set to host a forum on private financing through the effective development cooperation (EDC) lens.

 

This, however, has been the trend not just for the Bali meetings but also in other places globally. The shrinking spaces for civil society runs counter to the notion of inclusive development and enabling environment - two of the key tenets enshrined in the development effectiveness principles. This happens everywhere from high level engagements to communities on the ground. CPDE has been vocal against the global wave of shrinking civic spaces which include both legal, regulatory, extrajudicial impediments, cases of intimidation and challenges to CSO operations and financing.

Amid geopolitical tensions, conditions for civil society around the world have worsened over the years, with recorded shrinking and closing spaces for those on the ground and in high level engagements. CSOs have been demanding that governments should commit to reverse the trend of closing spaces and accelerate progress in providing an enabling environment for civil society, but results have yet to be realised.

 

Back to our principles: Democratic Ownership and a Human Rights Based Approach

 

For decades, the IMF-WB have been continuously enabling the environment for business. IFIs strong-arm many developing countries into channeling public funds to promote private investments yet attention towards the needs of the people remain scant, if not lacking. Before engaging in any development project, people’s consent and their involvement in the planning and implementation procedures must come standard.

 

For CPDE and the rest of the development community, there is a need to uphold the democratic ownership based on people’s need. The rush to profit must not infringe peoples’ rights and ownership of their development. A human-rights based approach must also be at the foundation of any governments’ development plans.

 

CSOs must ensure that any partnership with the private sector, if deemed necessary, should safeguard citizen engagement, and involve multi-stakeholder processes among CSOs, local governments, and trade unions. These must be consisted with EDC which is informed by the critical understanding of the development process, namely the examination of the content and purpose of aid and development policies as well as the political nature of the developing relationships. It shapes inclusive structures for accountability for donors and governments, promotes the alignment of donor country priorities with national development plans, and fully accessible aid data.

 

Effectiveness and accountability of private financing through the effective development cooperation thus rests on a democratic ownership of development. 



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[1] (2014).IBON International. Primer On the Private Sector in Development: Privatization of Development Cooperation?.

Retrievedfrom:http://www.iboninternational.org/sites/ibon/files/resources/primer%20on%20private%20sector%20in%20development.pdf

 

[1] (2018). Gabor, Daniela. The World Bank’s New Maximizing Finance for Development Agenda Brings Shadow Banking into International Development – Open Letter. Retrieved from: https://criticalfinance.org/author/danielagabor/

 

[1] (2018). IBON International. On the narrative of catalytic role of ODA/blended finance. Retrieved from: http://www.iboninternational.org/intervention/on-catalytic-role-oda-blended-finance

 

[1] (2013) CPDE. Background Paper on Private Sector Engagement in Development. Retrieved from: http://www.old.csopartnership.org/csopublications/cpde-background-paper-on-private-sector-engagement-in-development/

 

 

 

 

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