International Consortium of Investigative Journalists

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Former World Bank officials raise doubts about reform plan

Protesters outside the World Bank Spring Meetings

In March, World Bank Group President Jim Yong Kim announced he and other officials had found “major problems” at the planet’s best-known development institution. The World Bank, he said, had frequently failed to make sure that its borrowers had followed the bank’s rules for protecting communities in the path of development projects.

“We must and will do better,” Kim said.

The centerpiece of the bank’s response: a 5½-page plan that promises a boost in funding for enforcement of its “social safeguards” and better monitoring of projects that cost people their homes or land or harm their livelihoods.

But former senior officials at the bank — including an investigator who led an in-depth 2010 review of the bank’s safeguards, and the author of the bank’s resettlement policy — have doubts about Kim’s program.

They say the action plan does not address some of the deepest flaws in the bank’s policies, and question whether Kim and the bank’s senior management have the resolve and the clout to carry it out.

Anis Dani, a former lead evaluator for the bank’s internal Independent Evaluation Group who led a review of its safeguard policies in 2010, questions whether the bank’s senior management will embrace the reforms, because often “the president’s office has very little clout” over whether its agenda is adopted.

“The reality is that he makes a lot of pronouncements and senior management has a lot of competing priorities,” Dani said. “What matters most is whether senior management buys into it.”

From 2004 to 2013, projects financed by the World Bank physically or economically displaced an estimated 3.4 million people, an investigation by the International Consortium of Investigative Journalists, The Huffington Post and other media partners found. The bank regularly failed to follow its rules for protecting these communities and in some cases funded governments and companies accused of human rights abuses, the reporting team revealed.

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Former bank officials and human rights advocates say that changing the practices of a global institution that’s subject to powerful economic and political pressures will take more than promises of quick fixes.

It will take a prolonged, committed effort, they say.

Michael Cernea, a former World Bank manager who authored the bank’s resettlement policy and oversaw its implementation for nearly two decades, told the BBC the plan is “inadequate to actually correct the systemic failures” in the bank’s resettlement practices.

The World Bank said in a written statement to ICIJ that “we are redoubling our efforts to find better solutions and better ways to deal with resettlement issues.”

The bank did not respond to ICIJ’s inquiries about the concerns about its action plan raised by former bank officials.

ICIJ dug into World Bank statements and reports to explore whether the changes that the bank has promised will fix the problems in its resettlement policy. Here are some of the key questions:

What’s new?

The bank announced its action plan on March 4 — five days after ICIJ and The Huffington Post informed the bank that they had found “systemic gaps” in the bank’s policies for protecting people in the path of projects.

Along with the action plan, the bank released three internal reports detailing systemic failures in how it enforces its social safeguards. One of these reports, a sweeping review of its resettlement portfolio, had been completed in May 2012.

“Very few people knew these studies existed — I did not know these studies existed,” said Dani, the former lead evaluator. “They really kept them secret because they knew they would be explosive.”

Many of the reforms listed in the March 4 action plan had already been enacted by the bank.

These include a new risk assessment system, the Systematic Risk Rating Tool, which a guidance note by the bank indicates has been in place since June 2014. The plan also cites a broad reorganization of the World Bank which it said gave greater independence to safeguards specialists, a reshuffle that appears to have gone into effect in July 2014.

“It is indeed correct that several of the elements of the action plan were being developed, or were put in place, before the release of the plan,” a World Bank spokesman said in an email.

Jim Yong KimThe bank’s response to ICIJ noted various elements of the action plan that it said were new initiatives developed specifically as a response to the flaws that Kim acknowledged in his March announcement. Among these provisions are a 15 percent increase in the bank’s budget for enforcing safeguards, new checklists for staff to use in supervising projects involving resettlement and improvements to a tool used to monitor risks to communities throughout a project.

Paul Cadario, a former senior manager who worked at the World Bank for nearly four decades, said the plan failed to narrow down the precise causes of the bank’s resettlement failures or set priorities among the array of reforms that it listed.

“It looked like it was thrown together very quickly with everything they could think of,” Cadario said.

Where’s the money?

The proposed 15 percent increase in funding for safeguards operations will be allocated to two divisions of the bank, one focused on social development and one focused on the environment. The money will be “specifically targeted for environmental and social safeguards work,” a bank spokesman said.

When ICIJ inquired about how much additional funding would be allocated, the bank said it didn’t know.

“We can’t speculate as to what the new budget is going to be until the new safeguards framework is finalized,” a spokesman said.

The bank did not reply to questions from ICIJ about how much is provided in its current safeguards budget, or what the baseline for the 15 percent increase will be.

Ted Downing, a former consultant for the World Bank and president of the International Network on Displacement and Resettlement, said the bank’s promise to increase spending was “meaningless” without a baseline.

“It’s like saying I’m going to give you a 20 percent discount, but you don’t know the original price,” Downing said.

What projects are covered?

Fisherman in Mundra, IndiaThe action plan appears to cover a fraction of the investments that the World Bank Group doles out around the world.

The plan addresses enforcement of safeguards that apply to loans the bank makes to directly support specific government projects such as dams, roads or health initiatives. But these loans account for less than half of the bank’s overall spending, according to World Bank Group data.

The bank has also been directing significant amounts of its assistance to governments through loan programs that aren’t subject to the same safeguards.

The most common of these instruments is Development Policy Lending, in which the bank funds governments to support structural economic reforms rather than specific development projects.

A third of the bank’s public sector spending since 2005 went to development policy financing, according to bank statistics.

Another type of World Bank loan program that has also become popular in recent years, Program for Results, also is not subject to the same safeguards as project-specific loans. Program for Results loans, which are disbursed to government programs when specified results are achieved, have totalled billions of dollars in the last three years and have been described by the bank as “an instrument for the future … a new approach to financing development.”  

Another apparent exception is funding for companies provided through the bank’s private-sector lending arm, the International Finance Corporation, which also funds large infrastructure initiatives such as power plants. The IFC has its own social and environmental safeguards and enforcement staff, which are unlikely to be be affected by President Kim’s reform plan.

In 2014, loans by the IFC accounted for 26 percent of the World Bank Group’s overall spending.

The World Bank did not respond to ICIJ’s inquiries about whether the action plan applied to Development Policy Lending or Program for Results. The IFC did not respond to inquiries about whether the action plan applied to its own safeguards operations.

Will there be compensation?

While the bank has acknowledged flaws in its resettlement policies and promised to improve them in the future, it has not assumed responsibility for specific cases of wrongful or failed relocation.

Jessica Evans, a senior researcher with Human Rights Watch, said in a statement that steps to identify people who have been harmed by the bank’s failures “and make things right” are “entirely absent from the bank’s response.”

Advocates are also calling on the bank to impose consequences on staff members responsible for its failures in resettlement.

“One would expect major high-level management resignations or terminations over a blunder of this magnitude,” said David Pred, the director of the nonprofit Inclusive Development International. “But there is nothing in the action plan to indicate that any type of individual accountability is being contemplated.”  

In response to ICIJ’s questions about whether it intends to identify or compensate communities harmed by previous shortcomings, the bank referred ICIJ to a previous statement on resettlement which did not address the issue of restitution or accountability for staff lapses.

Will standards decline?

The bank’s action plan also lists the institution’s push to rewrite its social and environmental safeguards policies as an example of its efforts to fix problems in how it protects people affected by its projects.

However, an array of critics — including United Nations human rights officials and leaders of indigenous peoples’ groups — have criticized the process as an effort to weaken protections for vulnerable populations.

Sengwer people, Kenya.One change proposed in the latest draft of the safeguards revision, for example, would eliminate the requirement that the bank’s borrowers submit a plan for resettling and compensating displaced populations as a condition for projects to be approved.

Cernea, the bank’s former resettlement director, says doing away with writing resettlement plans before projects are approved would be devastating to displaced communities, because projects’ budgets are set by the time loans are approved.

“For the population which is known to be displaced, the plan should exist at the beginning,” Cernea said at an October 2014 forum on land rights. “Otherwise it condemns those people to be displaced without a budget.”

The World Bank said that its new approach would not result in unfunded relocation of communities. Borrowers will be required to prepare an Environmental and Social Commitment Plan prior to project approval that  will set out the borrowers’ safeguard obligations and a timeline for their completion, the bank said.

“We do not intend to finance activities until appropriate resettlement plans are in place,” a spokesman for the bank said.

Is the bank acting in good faith?

The bank’s admission in March of  shortcomings in its resettlement policies was a U-turn from years of failing to publicly acknowledge a problem.

“The promise that we are making is that as these problems surface we will let you know about them, and we will tell you specifically how we are going to move to correct those problems,” Kim, the bank’s president, said at a press conference in March.

But on May 12, in a response to a story by the Armenian news outlet Hetq about the bank’s resettlement policies, the bank appeared to retreat from Kim’s admission that there are “major problems” in how it handles displacement.

“The World Bank’s safeguards policies are rigorously applied during preparation and implementation of each project financed by the World Bank,” the bank said in a statement.

Pred of Inclusive Development International said there was a “major inconsistency” between the bank’s May 12 statement and its own internal review documents released on March 4. Those audits show “a systematic disregard for the bank’s resettlement policy over the course of two decades,” Pred said.

In public statements and complaints to ICIJ’s media partners, the bank has also objected to ICIJ’s estimate that 3.4 million people were  physically or economically displaced by bank-financed projects from 2004 to 2013.

The bank’s own long-hidden 2012 review used a similar methodology and found a similar number of people — roughly 3 million — who’d lost their homes, some of their land or part of their livelihoods due to bank-financed projects over a slightly earlier 11-year period.

The bank did not respond to ICIJ’s questions about whether it stood by its own estimate, or why it objected to ICIJ’s use of a similar methodology.

Downing, the former World Bank consultant, said the bank’s recent statements suggested that it was still in denial about the severity of its problems.   

“That moving of the goal line and inability to come to grips is immensely disappointing, and at this point inexcusable,” Downing said.

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