U.S. pushes for outside oversight of World Bank, opposes push toward
By Howard Schneider
The Washington Post, January 24, 2014
The United States is demanding stricter oversight of World Bank projects
amid concern that the bank has slipped in how closely it guards against
violence, forced resettlement and other conflict associated with the
works that it funds.
In a blow to plans set by World Bank President Jim Yong Kim, the United
States recently approved an appropriations bill that orders the bank's
U.S. board member to vote against any major hydroelectric project — a
type of development that has been a source of local land conflicts and
controversies throughout the bank's history. The measure also demands
that the organization undertake "independent outside evaluations" of all
of its lending.
The demand coincides with a spate of disputes between the World Bank,
civil society groups and the United States over past bank-funded
projects that have been linked to killings of villagers and forcing
people from their land. The cases include still-unpaid reparations from
a Guatemala dam project from the 1970s in which hundreds of villagers
were killed, concern about forced relocations in Ethiopia, and funding
for a palm oil and food company whose operations in Honduras in recent
years were the scenes of deadly fighting between workers and security
The bank has extensive procedures to guard the rights of local residents
and a number of ostensibly independent review bodies inside its
bureaucracy. But the growing concerns led Sen. Patrick J. Leahy (D-Vt.),
chairman of the Senate appropriations subcommittee on foreign
operations, to make a broad call for stricter oversight by an outside
"Senator Leahy does not believe the evaluation process — the internal
process — is what the institution needs to provide independent
evaluation of the effectiveness of their lending," said David Carle,
Leahy's spokesman. "It is time to make clear that [Kim] needs to look
outside the institution."
It is not uncommon for Congress to use the appropriations bill to attach
strings or recommendations about the operations of international
organizations such as the World Bank, where the United States is the
largest shareholder and an influential voice on policy.
The recently approved bill included $1.55 billion for the World Bank's
concessional lending arm — what a spokesman for the bank called "strong
support." But the list of amendments reflects skepticism about some of
the central ideas that Kim has laid out since he was nominated to the
bank's top job by President Obama two years ago.
Kim has said he wants to steer the bank toward larger "transformational"
infrastructure projects and has specifically mentioned the building of
large-scale hydroelectric dams in
energy-starved parts of Africa and elsewhere to advance development and
tackle climate change.
Carle said that Leahy believes the bank's renewed interest in large
hydro projects "is a mistake and wanted to send that message."
Kim also has said the bank should focus more of its work in the world's
conflict zones, where close oversight of which companies and projects
get funded is even more critical.
In the Honduran case, funding for the Dinant Corp. flowed both directly
from the bank's International Finance Corp. and — less transparently —
through a Honduran bank that the IFC supported. The IFC was criticized
by its internal ombudsman in a recent report for overlooking the risk of
violence in the area.
A World Bank spokesman said that the U.S. demand was still being
analyzed and that "we will work with the U.S. to understand their views."
The U.S. vote alone would not be enough to block hydroelectric or other
projects from moving forward. But the Leahy amendments recommend
withholding U.S. funding for the bank unless an outside evaluation
process is established.
They also require U.S. Treasury officials and the American member of the
World Bank board to pressure the organization to more quickly resolve
disputes where "individuals and communities . . . suffer violations of
human rights, including forced displacement, resulting from any loan,
grant, strategy or policy."
The amendments apply to all international financial institutions,
including regional ones such as the Inter-American Development Bank and
the African Development Bank. But the focus was on the World Bank, and
the measure referred specifically to disputes in Cambodia, Ethiopia
The Guatemalan case in particular stands out for its level of violence
at the time and for the long-standing demand for reparations for the
community involved. Construction of the Chixoy Dam in the 1970s was
funded by the World Bank and the Inter-American Development Bank. It
coincided with a bloody civil conflict, and several hundred villagers
were killed and thousands displaced in clashes as the army tried to
clear the way for the project.
The uprooted community has struggled since. In 2010, a reparations plan
was agreed to by the Guatemalan government, but the money has not been
paid. Under the Leahy amendment, U.S. Treasury officials are expected to
begin pressuring the World Bank and the IADB to push for payment. There
is a separate threat to withhold military training funds from the
Guatemalan army unless the reparations are paid.
The bank has suggested using money from existing projects to benefit the
affected families, and a spokesperson said the bank would "look for
opportunities" to do more.
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