[stop-imf] Development News Wednesday, March 15, 2000 (fwd)
Robert Weissman
rob@essential.org
Wed, 15 Mar 2000 10:22:09 -0500 (EST)
Don't miss the World Bank reporting on the A16 protests, at the bottom of
their very useful daily Development News.
Robert Weissman
Essential Information=09=09=09| Internet:=09rob@essential.org
This summary is prepared by the External Affairs Department of the World
Bank. All material is taken directly from published and copyright wire
service stories and newspaper articles.
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Headlines for Wednesday, March 15, 2000:
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- WORLD BANK STUDY HIGHLIGHTS NEED FOR POOR TO BE EMPOWERED.
- UKRAINE MISLED IMF TO GET DISBURSEMENTS.
- POOR COUNTRIES MUST RAISE WATER PRICES TO AVOID SHORTAGES: REPORT.
- K=D6HLER FORMALLY NOMINATED TO HEAD IMF.
- WORLD BANK GETS READY FOR TALKS ON LOANS FOR IRAN.
- Also in this edition...PRIVATE SECTOR TAKING UNEASY SHARE OF DEBT
BURDEN.
IMF AND WORLD BANK TARGETED FOR APRIL PROTESTS.
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WORLD BANK STUDY HIGHLIGHTS NEED FOR POOR TO BE EMPOWERED.
The World Bank yesterday said global efforts to eradicate poverty should
be built from the ground up through community-driven projects that empower
the poor to take control of their lives, reports Agence France Presse. =20
"The central challenge of the 21st century is to create governance systems
from the local to the global level that include and respond to the
priorities and concerns of the poor. This requires investment in their
organizations so they can negotiate directly with governments,
non-governmental organizations, traders and international agencies," said
Deepa Narayan, author of a just-released World Bank study entitled "Voices
of the Poor."
Dagens Nyheter (Sweden) says that the reading is dismal: hunger,
powerlessness, corrupt governments, oppression and injustices. "The most
important challenge for the 21st century is to find methods which take
their departure in the experiences of the poor themselves, the paper
quotes Deepa Narayan as saying.
The report, which was 10 years in the making, is based on personal
accounts from more than 60,000 men and women in 60 countries. "Poverty
consists of many interlocked dimensions," according to the study.
"Although poverty is rarely about the lack of only one thing, the bottom
line is always hunger -- the lack of food."
But the Bank also found that poverty entails psychological suffering as
well -- "powerlessness, voicelessness, dependency, shame and humiliation,"
continues the story. For that reason, according to a Bank statement, the
institution has begun to mobilize support for more community-based
projects. "Poor communities can put themselves in 'the driver's seat' in
assessing their own needs and devising ways to improve their living
conditions," the statement said.
The Bank said its lending of some $3 billion to community-based
development projects around the world has attracted an additional $5
billion from donor governments and other agencies. As a result, it added,
more than 60 countries have established social development projects that
have improved schools and health services and upgraded water supplies and
local roads. Elsewhere in the study, the Bank concluded that state
intervention has been largely ineffective in alleviating the plight of the
poor, who do not in general trust government officials.
The consequences of poverty are well known, adds the story. Life turns in
a vicious circle towards misery - starvation, diseases, decay and
powerlessness. Furthermore, crime and poverty go hand in hand, which can
be seen with special clarity in several former Soviet republics, notes the
piece.
The news comes as Reuters reports that the World Bank and IMF intend to
monitor the impact of aid programs on poverty reduction more closely and
will strengthen cooperation with other donors and civil society to ensure
programs have the desired effect, senior officials said yesterday. "It
sounds very simple but it represents a major change," John Page of the
Bank's economic policies department said. "Aid agencies tend to focus on
inputs rather than impacts. Intermediate goalposts are a way of measuring
success," he added.
Page and other Bank and IMF officials were addressing a news conference on
the sidelines of a seminar in Cote d'Ivoire on poverty reduction. Anthony
Boote of the IMF's policy development and review department said the
donors were responding to "considerable evidence that programs only work
if they are 'owned' by the countries concerned."
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UKRAINE MISLED IMF TO GET DISBURSEMENTS. The IMF declared that Ukraine's
central bank engaged in a number of transactions totaling nearly $1
billion to generate a false, optimistic picture of its foreign exchange
reserves between 1996 and 1998, reports the Wall Street Journal (p.A23).
The National Bank of Ukraine sent as much as $635 million of its reserves
through a foreign commercial bank that was then channeled either back into
its account or into government bonds and treasury bills. A further $300
million was taken out of the reserves and put into forward
foreign-exchange swaps and options contracts, the Fund said.
The IMF said in a statement that "some of these transactions may have
caused reserves to appear to be higher than they actually were." Relying
on such misleading data, the IMF said it approved three loan disbursements
to Ukraine in late 1997 and early 1998 that it would have decided against
if the "true state of Ukraine's reserves had been known at the time."
The New York Times (p.A10) also reports, adding that the IMF and the US
Treasury department announced that they would consider whether to put new
controls on future loans to Ukraine as a consequence of the findings. =20
The IMF said that any future disbursements of aid to the country would be
administered by the Fund itself and would not be deposited directly in
Ukraine.
The Financial Times (US edition, p.1) also reports.
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POOR COUNTRIES MUST RAISE WATER PRICES TO AVOID SHORTAGES: REPORT.
According to an international report published yesterday, prices paid by
water customers in developing countries must rise substantially to avoid
life-threatening shortages and environmental damage, the Financial Times
reports. The report by the World Commission on Water, which is supported
by the World Bank and the UN, calls for radical changes in the way in
which water services are subsidized in some of the world's poorest and
most disadvantaged regions.
It says annual investment in water facilities needs to more than double
from $70 billion to $180 billion to meet rising demand and reduce the
numbers of people without clean water-one billion-and without sanitation-3
billion-to just 330 million by 2025. Governments unable to finance this
huge investment must encourage the private sector-which provides less than
five percent of urban water to consumers in developing countries-to fill
the gap. The single most effective stimulus for private sector investment
would be to adopt "full cost pricing of water use and services," says the
commission.
The international water investment market is dominated by a tiny number of
very large companies, while heavily subsidized municipal or state
companies control the supply of clean water and sanitation in most
countries. This system has led to severe under-funding and grossly
inefficient water use, says the report. "Without full cost pricing, the
present vicious cycle of waste, inefficiency, and lack of service for the
poor will continue," it warns.
Private parties, the report notes, "will not invest unless they can be
assured of a reasonable return on their investments. Mechanisms must be
found whereby those who use water inefficiently have incentives to desist
and transfer that water to higher valued uses, including environmental
purposes." Governments should not subsidize water prices but should
target aid to individuals through welfare provisions, it says .
Commenting in an editorial, the FT (p.12) says the difficulties of
regulating private companies in developing countries and of making them
accountable to local communities are great, but they have been overcome in
some schemes. So has the problem of giving poor people credits to pay for
water. The World Water Commission, supported by the UN and the World
Bank, makes a powerful case this week for change towards market pricing
and private supply, the FT says.
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K=D6HLER FORMALLY NOMINATED TO HEAD IMF.
The accession of EBRD president Horst K=F6hler as head of the IMF appeared
almost inevitable yesterday as he was formally nominated before a meeting
of the organization's board of directors, reports the Financial Times
(p.14). Japan yesterday withdrew its candidate, Eisuke Sakakibara, and
threw its weight behind K=F6hler. After K=F6hler won unanimous backing from=
EU
finance ministers and then from the US on Monday, the former G7 "sherpa"
is now backed by all the governments of the G7 leading industrialized
economies.
In a separate report, Reuters notes that World Bank President James
Wolfensohn said yesterday that Horst K=F6hler would do an excellent job as
head of the IMF, after his nomination ended months of bickering between
Europe and the US. "I am very glad that this thing is finally over. I
believe he will do an excellent job and I look forward to working with
him," Reuters reports Wolfensohn told the National Press Club in
Washington.
The FT continues that Jose-Pedro de Morais, the Angolan executive
director, announced yesterday that the IMF board had decided to set up a
special committee to change the selection process. This would aim to
devise a procedure that was transparent, involved the entire membership,
and gave them a choice of several candidates. Leaving aside K=F6hler's
capabilities, the process by which he is coming to office has been, by
almost universal agreement, discredited. Few viewed it as a serious
attempt to find the best candidate for the post.
Meanwhile, the New York Times (p. C1) notes that K=F6hler is not widely
known, not even in Germany. But, says the story, he is no stranger to the
kinds of seismic political and economic upheaval that come with the
responsibility of managing a global lender to financially distressed
nations, pointing out that K=F6hler was a financial engineer behind two of
Europe's biggest transformations (the reunification of Germany and the
creation of the euro). Despite his professional achievements, K=F6hler has
worked largely out of the public view. That could be one of his biggest
problems, the Times says.
The Wall Street Journal (p. B10) adds that it won't be the first time
K=F6hler, 57 years old, has landed in an institution under fire. When he
took over the London-based EBRD in September 1998, it faced annual losses
of $305 million, thanks largely to the Russian financial collapse. The
story says K=F6hler refocused the bank's lax investment policies and
tightened up the bank itself. The strong-willed K=F6hler isn't always a
supporter of American policy, the newspaper observes, referring to a
recent EBRD loan to a Russian oil company to which the US was opposed. But
K=F6hler's impassioned endorsement won the day, the story notes.
Does K=F6hler have a vision for a new "global financial architecture,"
Christian Science Monitor editorial (p. 10) asks. Will he understand the
impact of e-commerce? Will he know when IMF loan conditions create too
much hardship? Does he believe the IMF should not help countries that can
raise money in private capital markets? Should the IMF exist at all? Such
questions need public answers, the editorial opines, adding that as a
compromise candidate, K=F6hler should let it be known soon how he will lead
this global body.
Meanwhile, German Finance Minister Hans Eichel has speculated that no
decisions on the future of the IMF would be taken until the next US
president is elected, reports Die Welt (Germany, p.14). The coordinator
for German-American relations in the German Foreign Ministry, Karsten
Voigt, has since said on radio that the EU countries should also develop a
proposal for the future role of the Fund, and former State Secretary
Heiner Flassbeck has said that Europe should continue the discussion on
the future division of labor between the IMF and the World Bank. The US
call to transform the IMF into a kind of "fire station" would only make
sense if other institutions could give additional support, according to
Flassbeck.
Handelsblatt (Germany, p.1) also reports.
Jim Hoagland, in his Washington Post column (p. A27) comments that the IMF
squabble may not reflect simple ham-handedness, as many in Washington are
ready to conclude. Gerhard Shroeder may have been so single-minded because
he sees the IMF as a valuable piece in the new game of multi-polar global
strategy that unfolds as the era of Boris and Bill fades. If so, the
battle around the IMF has only begun, Hoagland says.
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WORLD BANK GETS READY FOR TALKS ON LOANS FOR IRAN. The World Bank is
preparing to discuss loans to Iran for the first time since 1994 and the
controversial projects should soon go to the World Bank's board, Reuters
reports World Bank President James Wolfensohn said yesterday. Speaking to
the National Press Club in Washington, Wolfensohn said the two proposed
loans, worth a total of $231 million, would help Iran fund projects for
sewerage and health care.
But Wolfensohn admitted he did not know if the Bank's 24-member executive
board would approve the credits, which the US has already said it will
vote against, the story notes. "There is a split of opinion on the
board," Wolfensohn is quoted as saying. "That split of opinion is (on the
one hand) that the new regime in Iran is one to whom we should reach out,
and there are others who have the view that the new regime is one to whom
we should not reach out."
Wolfensohn added: "I am doing the only thing that an intelligent person
who wants to keep his job should do and that is to modestly move forward,
see if there are proposals and then take them to the wise counsels of our
board. My guess is that we will do that some time soon."
The Bank, which traditionally operates by consensus, is often reluctant to
press ahead with loans if Washington has made its disapproval clear and if
Washington has won backing from other major shareholders, says the story. =
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"I do not have the privilege of making the political judgments,"
Wolfensohn said. "I have the responsibility of looking at the issues of
poverty and development and this thing has been dragging on for more than
two years now and the feeling is such that we should bring it to the
board."
Other Bank officials said experts were discussing the projects with
Iranian officials at meetings in Paris later this month. If things went
well, the two projects could go to the Bank's board in late April or early
May.
Separately, the New York Times (p. A8) also reports, noting that the
Clinton administration, eager to encourage moderation in the land where
the US has been reviled as the Great Satan, is about to ease some import
bans on Iranian consumer goods: pistachios, caviar and carpets. The Wall
Street Journal (p. B2) also reports, noting that the possible ease in some
trade sanctions may be a gesture to reformists who triumphed in last
month's election. The new exports to the US, trade experts say, probably
wouldn't exceed $500 million a year.
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Also in this edition...PRIVATE SECTOR TAKING UNEASY SHARE OF DEBT BURDEN.
IMF AND WORLD BANK TARGETED FOR APRIL PROTESTS. PRIVATE SECTOR TAKING
UNEASY SHARE OF DEBT BURDEN. After initial grumbles and disquiet over the
IMF principle of "burden sharing"-the involvement of private creditors in
debt restructurings by troubled countries-it is becoming a common
practice, reports the Financial Times (p.13). Eurobond investors have
accepted such restructurings in Ukraine, Pakistan, and Ecuador. Yet
investors want further safeguards before endorsing the IMF approach as
standard market practice.
When the Fund first articulated its policy of burden sharing following
Russia's debt default in August 1998, banks were worried at the prospect,
says the story. Banks now admit that some of their worst fears have not
been realized. "The market has been flexible in dealing with countries in
crisis, and the actual process of bond restructuring is proving more
orderly and quicker than a lot of people feared," another analyst says. =20
And there is not much evidence of emerging economies' access to capital
being constrained.
Nevertheless, the IMF still faces some criticisms. One is that its debt
restructuring policy is not transparent-there is no set of rules to guide
investors. Other criticisms of burden sharing are that big countries get
treated differently and will simply not be allowed to fail by the Fund,
and that the principle of burden sharing is not always applied
symmetrically. Although private sector investors are now drawn into debt
restructurings involving IMF lending, the reverse is not always true. =20
Official creditors such as national governments that comprise the Paris
Club have escaped the effects of some private-sector debt restructurings.
Some private-sector participants insist the IMF should bear more
responsibility. "The IMF and the World Bank are forcing private lenders to
bear the financial consequences of their past mistakes, while never being
forced to bear the financial consequences of their own," an analyst is
quoted as saying.
IMF AND WORLD BANK TARGETED FOR APRIL PROTESTS. Activists will converge
on the streets of Washington in April to disrupt the spring meetings of
the IMF and the World Bank, but will avoid the violence seen at the WTO
summit in Seattle, Reuters reports organizers said yesterday. "We want to
be engaged in nonviolent direct action and ... we will not condone the
destruction of property or the hurting of individuals," Rev. Grayland
Hagler of the Plymouth United Church of Christ is quoted as saying at a
news briefing yesterday.
That notion was echoed by others in the Mobilization for Global Justice
coalition, which is organizing the protest on April 16 and 17 to coincide
with the spring meetings. But Nadine Black said: "We cannot control the
masses of people who come to Washington and cannot take responsibility for
people who act outside of our guidelines."
The activists, a coalition of environmentalists, religious groups, labor
unions, students, anarchists and others, believe the IMF and the World
Bank have deepened poverty in poor countries through ill-conceived
economic policies, the story says. The coalition wants the two
institutions to cancel all debts owed to them and to cease foisting
austere economic policies on poor nations. They are also seeking
reparation for poor nations for the damage they say the lending bodies
caused through bad lending. Organizers are hoping thousands will descend
on the capital in April for a week of activities culminating in mass
protests aimed at shutting down the IMF and World Bank meetings.
Meanwhile, notes the story, World Bank President James Wolfensohn said
yesterday, "I think demonstration is useful and I will never stop it, but
I prefer to sort it out in discussion."
The Washington Post (p. B3) also reports.
AFRICANS CALL FOR MOZAMBIQUE DEBT RELIEF. After a meeting with President
Joaquim Chissano, six African presidents called on the international
community yesterday to cancel Mozambique's foreign debt so that it can
rebuild its flood-ravaged economy, where hundreds have died and more than
200,000 are homeless, the New York Times (p. A6) reports. The Washington
Post (p. A22) also reports.
Mozambique's debt now totals more than $8 billion, AFP reports a
debt-eradication pressure group said yesterday, one day ahead of a Paris
Club of creditor nations meeting which is to examine the debt. According
to Jubilee 2000, Mozambique owes $4.3 billion in bilateral debts, $2.1
billion in multilateral debts, and $2 billion in private debt. Under the
Highly Indebted Poor Countries' Initiative (HIPC), creditors agreed last
June to cancel two-thirds of Mozambique's debt. The country now pays $73
million a year to service its debts, Jubilee 2000 said. That figure is
expected to drop to 45 million later this year.
$325 MILLION LOAN A LIFELINE FOR PNG. The World Bank and IMF are set to
approve a $200 million loan package to Papua New Guinea, helping to lift
the country's battered international reputation and perhaps throwing a
lifeline to Mekere Morauta's seven-month-old government, the Sydney
Morning Herald (Australia) reports. Sources told the Herald that the IMF
was "all but sold" on the merits of the loan to be used for balance of
payments support and was working towards swiftly drafting its terms with
the Central Bank ahead of an IMF Board meeting in coming weeks. Sources
also maintained that the World Bank was also "very strongly on board" and
was expected to approve its $100 million structural adjustment loan
shortly.
BRIEFLY NOTED...The IMF warned Indonesia yesterday that loans organized
under an international rescue package could be again put on hold if legal
action was not taken in the notorious Bank Bali scandal, reports the
Australian (p.9), noting that IMF chief representative John Dodsworth
reinforced criticisms by the World Bank of a recent court decision to drop
charges in the case.
A UN report on Burma (Myanmar) yesterday condemned abject poverty,
violations of human rights, and the large-scale displacement of some
ethnic groups in 1999, reports AFP, noting that about one million children
in Myanmar suffer from malnutrition, and there is an increasing use of
heroin and an alarming spread of HIV/AIDS, according to a World Bank
report that estimated the figure at more than one million
cases.....Investors in Thailand were optimistic on the eve of a bankruptcy
case ruling that economists say will be a test of whether the legal system
will help Thailand's banks dig out from under $51 billion in bad loans,
the New York Times (p. C4) reports...East Timor is setting up a
rudimentary but workable financial administration, with the aim of
eventually reducing its dependence on international donors, the IMF said,
the Wall Street Journal (p. A20) reports.
Bangladesh is set to strike at least two oil and gas exploration deals
with several US companies during the upcoming visit by US President Bill
Clinton, AFP reports, noting that the opposition has opposed the leasing
out of gas fields to foreign companies and the export of gas to
neighboring India, as is being pressed by the US and the World Bank.
The Chilean economy will grow by 6 percent this year, but the country must
reform its labor laws to distribute the wealth more equitably, Chile's new
president, Ricardo Lagos, said Monday in his first news conference, the
Miami Herald (3/14, p. 7A) reports. . .The International Finance
Corporation (IFC) will provide $51 million in financing for a newly
created company, Messer Trinidad & Tobago Ltd., which supplies industrial
gases to local industries, the Journal of Commerce (p. 9) reports.
The US might include imposition of new conditions on foreign aid to
oil-producing nations and added pressure on the administration to allow a
step-up in domestic drilling for oil, both off-shore and in Alaska, the
Washington Post (p. A4) reports.