Public hearing on the World Bank

24 October 2007

Convened by the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

Campaign Europe, under the auspices of the
Permanent Peoples’ Tribunal

The Hague, 21 October, 2007

DECLARATION

Upon request from the World Bank Campaign Europe, a Public Hearing was
convened on October 15 in the Hague, The Netherlands under the auspices
of the Permanent Peoples’ Tribunal to provide a forum to assess the
performance of the World Bank in the last 15 years.

The Permanent Peoples’ Tribunal (PPT) in continuity with the Russell
Tribunal supported by the Lelio Basso Foundation, has the stated goal of
giving public profile and a juridical qualification to violations of
fundamental rights that do not find a proper redress at the
institutional level. It bases its actions on the Universal Declaration
of Peoples’ Rights of Algiers, 1976.

The PPT held specific sessions in Berlin in 1988 and Madrid in 1994 to
assess World Bank and International Monetary Fund IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org activities and roles
against their impact on peoples’ rights. Other sessions have also taken
place that are relevant to the specific area of work and analysis of the
later Hearing, addressing the challenges posed by the globalized economy
to peoples’ rights and self-determination.

The latest session held in Vienna in May 2006 within the Enlazando
Alternativas 2 process, dealt with the responsibilities of European
Transnational Companies (TNCs) in Latin America. It analysed cases of
the privatisation of public utilities and the extraction of natural
resources. It pointed out the “complicity of European governments that
support their TNCs“ and the role of international institutions such as
the World Bank, the WTO WTO
World Trade Organisation The WTO, founded on 1^st January 1995, replaced the General Agreement on Trade and Tariffs (GATT). The main innovation is that the WTO enjoys the status of an international organization. Its role is to ensure that no member States adopt any kind of protectionism whatsoever, in order to accelerate the liberalization global trading and to facilitate the strategies of the multinationals. It has an international court (the Dispute Settlement Body) which judges any alleged violations of its founding text drawn up in Marrakesh.

(the World Trade Organisation) and the
International Monetary Fund. The last of a series of hearings held by
the PPT Chapter in Colombia, focusing on the oil sector, acknowledged
the relevance of the concept of ecological debt when dealing with the
responsibilities of European TNCs.

At the end of September 2007, an Independent People’s Tribunal on the
World Bank took place in India. Finally, a few days before the The Hague
Hearing, another PPT session was held in Managua, Nicaragua, on the
Spanish Company Union Fenosa.

The later hearing in The Hague was an important opportunity to continue
developing new approaches to the current area of activity, by deepening
the analysis of the World Bank’s role in various countries of the Global
South.

It took place on the first day of a Global Week of Action on Debt and
the World Bank, launched by a broad platform of NGOs and social
movements across the globe calling for a substantial change in World
Bank policies and practices, an end to public financing of fossil fuel
projects, an end to the imposition of strict conditionalities that
instead of leading to poverty alleviation lead to further
impoverishment, and a commitment by governments to launch public audits
on foreign debt. It developed along two areas of work, namely the human,
social and environmental consequences of the World Bank’s role in
imposing economic and policy conditionalities, and the role of the Bank
in support of fossil fuel extraction and use.

The expert panel was chaired by Francesco Martone, an Italian Senator in
representation of the Permanent Peoples´ Tribunal and was further
composed by Charles Abugre, development economist and head of policy and
advocacy for Christian Aid from Ghana, Maartje Van Putten from the
Netherlands, former member of the World Bank’s Inspection Panel, Marcos
Arruda a development economist and publisher from Brazil, member of PACS
and the Transnational Institute and Medha Patkar, from India, Founder of
the Save Narmada (River Valley) Movement and National Convenor of
National Alliance of People’s Movements.

The expert panel heard testimonies by

Gonzalo Salgado, of the National Consumer Defence Network (Nicaragua) on
the liberalisation of electricity services;

Collins Magalasi, of Action Aid Malawi, on the issue of food security;

Temo Tamboura, of CAD Mali, on the liberalization of the cotton sector;

Miguel Palacin of the Coordinadora Andina de Organizaciones Indigenas
(CAOI), from Peru on reform of the mining laws in Peru;

Svetlana Anasova, of the Berezovka Initiative Group, Kazakhstan on “The
Karachanak Oil Pipeline” (as she was unable to attend the Hearing in
person, her submission was read aloud);

And Michael Karikpo, of Environmental Rights Action, Friends of the
Earth Nigeria on the West African Gas Pipeline;

FINDINGS AND OUTCOMES OF TESTIMONIES

The World Bank came into existence after the World War II in order to
rebuild Europe and with the purpose of creating new markets, mobilizing
resources while supporting infrastructure and productive capacity.
Notably after the creation of the International Development Association
(IDA) it has repositioned itself in support of poverty alleviation, its
avowed goal, while advancing a global free trade agenda through its
lending and conditionalities. A parallel and unofficial history of the
World Bank tells us years of resistance at the local and global level by
social movements and communities eager to reclaim their right to
self-determination and control over their resources.

The testimonies presented to the Panel in The Hague indicate that the
World Bank has been rather influential while dealing with the State and
the public sector in borrowing countries. Its interventions have gone
much beyond its formal limited role of a lending agency and went into
policy-making, prioritizing, budgeting and planning in every sector of
governmental action. This has enabled the Bank to generate and force a
development paradigm that is market- and growth-oriented rather than
aimed at meeting basic human needs while attaining social and
environmental justice. Its lending conditionalities lead to the
conversion of life-supporting natural resources such as land, food, air,
seeds and energy into merchandise.

In the case of *Nicaragua* the panelists listened to an extensive
explanation of the developments in the energy sector what in brief
showed a failure of the privatization process of public utilities in
guaranteeing full and broad access to electricity for the poor majority
of the country, while generating huge profits for the Spanish monopoly
Union Fenosa while at the same time creating indebtedness for the State.

In the case of *Mali *the Panel was told that Mali was forced to
privatise the cotton sector in order to meet World Banks conditions with
the purpose to receive a debt reduction of 70 million and eligibility
for the Enhanced Indebted Poor Countries Initiative. As a result,
according to the witnesses, the cotton prices were liberalised what
subsequently led to a decrease by 20% while cotton is the principle
source of the country’s revenue. It is significant for the panellists
that the timing of World Bank programs in Mali coincided with the cotton
liberalisation negotiations at the WTO.

The Panel noted the remarks made by the witnesses as to how the World
Bank is imposing conditions on countries negotiating a loan, leaving
little or no room for these countries to choose their own direction. In
at least two cases, the Panel noted that access to the HIPC Heavily Indebted Poor Countries
HIPC In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.

The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.

Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.

List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia. debt
reduction processes was conditioned to the implementation of structural
adjustments and liberalization of economies, thereby producing a vicious
circle of forced payment of increasing volumes of debt. An uneven
distribution of resources and benefits resulted in a massive drain of
national resources away from the imperatives that could ensure
distributional and social equity Equity The capital put into an enterprise by the shareholders. Not to be confused with ’hard capital’ or ’unsecured debt’. and self-reliance. In this process, the
traditional, customary, cultural and territorial rights of local
communities and indigenous peoples are compromised and sacrificed.
International conventions and UN covenants such as ILO 169 on the rights
of indigenous populations have been either ignored or violated.

The panel acknowledges the relevance of the concepts of ecological and
social debt when dealing with the consequences of such development
paradigm. Additionally, evidence of odious and illegitimate debt - such
as in the cases of Peru and Nigeria – has been presented, whereby
foreign debt accumulated during dictatorial regimes is still being paid
off by the victims of the past. Still, the legal frameworks that can be
applied to the concepts of illegitimate, odious and ecological debt
might require further articulation and development.

In many cases, the Panel noted the points made about violations of
peoples’ right to be proactively engaged at all levels of the
decision-making process as is laid down in several of the World Banks
own policies. Besides the Panel notes this is not in free agreement with
the principle of ‘prior informed consent’ in any policy or decision
affecting their own lives, and territories.

Hence, through its policy advice, the Bank has prevented the full
exercise of participatory and direct democracy, thereby widening the gap
between governments and peoples, creating a fictional political space
where genuine interests are overlooked if not ignored. In this context,
the role of the national parliaments has frequently been undermined if
not denied by imposing on them decisions already made by governmental
authorities and Washington-based officials.

The Panel learnt however interestingly, that in certain cases, such as
in *Malawi* countries might be able to find their own route to social
justice, food sovereignty and food security, by rejecting World Bank
conditionalities and continuing to subsidize local agriculture and
markets, while fostering the inclusion of the poor. The Panel was told
that the parliament of Malawi was forced to accept the closure of 400
local rural markets that according to the witnesses led to a dramatic
loss of jobs of thousands including rural farmers that did no longer
have access to markets to sell their products. This decision in a later
stage was turned over and the markets were re-opened. As a consequence
of this decision the food situation in rural areas improved substantially.

The cases on mining in *Peru* and oil and gas extraction in *Nigeria and
Kazakhstan* show the link between World Bank developmental priorities
and the advan, and fossil fuel extraction has, according to the
witnesses, resulted in the violation of peoples’ rights to health, a
clean environment, and water. No compensation of losses or replacement
of livelihoods was ever ensured either by the Bank or the government
despite evidence produced by the Bank itself.

More generally, the continued support of the World Bank to fossil fuel
extraction and use, with the associated greenhouse gas emissions, rather
than small scale renewable energy, raises serious questions about the
Bank’s role in and commitment to the Post-Kyoto process and support for
eco-friendly technologies. It is another case of “institutional amnesia”
considering that the Extractive Industries Review, 2004, supported by
the Bank itself, recommended a phase-out of Bank financing of fossil
fuel projects, the adoption of the principle of free, prior informed
consent and compensation for affected communities.

RECOMMENDATIONS AND NEXT STEPS

Drawing from the testimonies and its own experience and analyses, the
Panel believes that:

a. There is a need and urgency to build upon local resistances and
alternatives to the dominant economic free-trade and growth oriented
paradigm, in order to strengthen alliances and movements, while
confronting World Bank culture and ideology, challenging its political
and economic role;

b. Commons are for the common good and not for corporate profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. .
Therefore, the Bank should abstain from supporting - or recommending -
the privatisation of the commons and of life-supporting resources such
as public energy services and drinking water systems;

c. Social-environmental and economic audits and/or impact assessments of
the World Bank should be carried out in a transparent and timely fashion
and the same should include the people that could be directly or
indirectly affected by the projects funded by the World Bank. Moreover,
a moratorium of projects causing conflict should be considered in order
to allow for a meaningful assessment and compensation measures to be
developed and implemented;

d. The recommendations of the 2004 Extractive Industries Review, the
outcome of a multi-stakeholder exercise in global policymaking, on the
request of the World Bank itself, are still valid and cogent and should
be implemented in letter and spirit as a matter of urgency;

e. Parliaments and governments should initiate independent debt audits
in order to identify historical responsibilities, and the social,
economic and environmental, as well as juridical implications of debt
for peoples’ rights and self-determination. Parliaments and governments
should take the opportunity of the ongoing negotiations for the
replenishment of IDA (International Development Association) to
condition any new replenishment to a significant and urgent change in
World Bank’s practices and conditionalities currently aimed at fostering
a pro-growth, pro-free trade agenda rather than social, economic and
environmental justice;

f. No violations of UN conventions and covenants in any development
project can be accepted, with or without bilateral and multilateral
funding;

g. Any investment or operation by the World Bank must respect the
community rights by practising the principle of ‘free prior informed
consent”.

PANEL MEMBERS

Francesco Martone, Chair
Charles Abugre
Marcus Arruda
Medha Patkar
Maartje Van Putten