Tuesday, February 7, 2012

New World Bank infrastructure strategy: Paving over development?

New World Bank infrastructure strategy: Paving over development?
News|Bretton Woods Project|7 February 2012|update 79
www.brettonwoodsproject.org/art-569563

A World Bank infrastructure strategy update, developed because of a G20
push for more infrastructure investment, reaffirms the Bank's commitment
to large-scale projects and scaled up private finance through
public-private partnerships (PPPs, see Update 77), despite questions
about bloated costs and development impact.

The updated strategy, Transformation through infrastructure: World Bank
Group infrastructure strategy update, was leaked in November last year.
The Bank strategy actually functions as an update to its previous
infrastructure strategy, and this seems to have precluded any
substantial consultation process (see Update 77). It outlines three main
pillars of future Bank infrastructure investment. The first is to
continue its more typical infrastructure projects, "while increasing
effectiveness in the areas of poverty, governance, gender and knowledge."

The second pillar is a new focus on large "transformational" projects
that "maximise green, regional, and inclusive/broader development
benefits". These will also represent "points of leverage in the universe
of potential infrastructure investments opportunities", meaning projects
that involve a greater diversity of financing sources such as donor
governments, including new middle-income donors, international
mechanisms such as climate funds, and the private sector.

The third pillar aims to bring in "more private sector financing". The
International Finance Corporation (IFC), the Bank's private sector arm,
is creating a new global equity fund for infrastructure to "ramp up"
business, while the Multilateral Investment Guarantee Agency (MIGA), the
Bank's political risk insurance agency, will "continue to scale-up its
guarantee support to the infrastructure sector". The Bank is also
implementing an action plan to double private sector engagement in PPPs
in infrastructure.
Familiar themes

These areas match the priorities of the G20 development working group, a
body of officials preparing plans for G20 development ministers meetings
(see Update 77). The final report of the G20-commissioned High Level
Panel (HLP) on infrastructure also emphasises "transformational
projects" and scaled-up PPPs. The G20-mandated Infrastructure action
plan, produced by the Bank with input from other multilateral
development banks (MDBs), lays out the role of MDBs in this process. The
Bank's strategy is firmly in line with these documents, outlining the
role of Bank in the implementation of this agenda.

Both reports were made available after the G20 meeting in Cannes in
November 2011. Infrastructure is one of the three top development
priorities of the Mexican G20 Summit in June.

In a November analysis of the policy formation of the G20-MDB agenda,
Nancy Alexander of the German political foundation Heinrich Boell notes
that "the role of the HLP and the dominance of private financiers in its
composition create the impression that, hand-in-hand with the MDBs, the
G20 has created a mechanism to design and implement an infrastructure
agenda with minimal involvement by the governments and stakeholders of
affected low-income countries much less any democratic debate or
processes." She observes that "there has been a serious democratic
deficit in the formulation of the G20 and MDB agenda. The Action Plan
was a joint document by six MDBs, so it circumvents the individual MDB
policies on consultation. Furthermore, the Bank's new strategy
demonstrates the profound impact of the G20 process on the MDBs,
possibly leaving the 173 countries which are part of MDB governance, but
not part of the G20, by the wayside."

Transformation?

A November paper by UK NGO network Bond questions the developmental
impact of the G20 agenda. It argues that "the focus is very much on
infrastructure investment as key to economic growth rather than to
poverty reduction." It also says that "there is concern that the
involvement of the private sector will divert both private and public
spending from critical areas and may lack the appropriate safeguards
surrounding the social and environmental impact on local communities."
The paper notes that an emphasis on PPPs implies a danger of the "the
privatisation of financial gains", while the Heinrich Boell report
argues that "many low-income countries are not in a position to use
scarce domestic resources to support the scale or nature of
infrastructure investments envisioned by the G20."

The Inga hydropower project in the Democratic Republic of Congo (see
Update 70, 67) is touted by the HLP as one of 11 "exemplary
transformational" projects. Peter Bosshard of NGO International Rivers
notes that the first phases of Inga "have turned into an expensive white
elephant that hardly provides any benefits to the poor. Even the
rehabilitation that the World Bank is currently funding has turned into
a bottomless pit of mismanagement. The future stages of the Inga scheme
foresee the construction of hydropower dams ... [whose] outputs are
primarily destined to serve the needs of mining companies and urban
centres in far away places such as South Africa, the Middle East, and
Europe." He argues that "if the new approach proposed by the World Bank
and the G20 promotes transformation, it is the transformation of aid
into corporate welfare."

Srinivas Krishnaswamy of Indian NGO Vashudha Foundation also questioned
how 'transformative' projects devised under the new strategy will be.
"The pathways proposed by the Bank have no real plans to address poverty
and the desperate need for energy access in low-income countries.
Instead they are in favour of conventional energy infrastructure, which
has not delivered energy access or alleviated poverty".
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