Introduction

 

The World Bank Group lends about US$25 billion a year and is currently involved in roughly 1,800 projects in Africa, Asia, South and Central America and Eastern Europe. These projects influence a wide range of government policies and hundreds of billions of dollars in government spending. Together with other Multilateral Development Banks (MDBs) such as the Inter-American Development Bank and the Asian Development Bank, the World Bank Group exercises a tremendous amount of control over low and middle-income countries around the world.

 

Canada is one of only a handful of countries directly represented on the boards of all of the MDBs, including the World Bank Group.  One out of every five dollars of Canada’s foreign aid is given to the MDBs, half of which goes to the World Bank Group alone.  This means Canada sends roughly $230 million to the World Bank every year.

 

This handbook begins by describing what the World Bank Group is, what it does, how it is structured, how it works and how it is financed. This is followed by an explanation of who speaks for Canada at the World Bank Group and who the key governmental players are in determining what Canada says at the institution. Finally, the handbook ends with tips for civil society activists that are interested in better understanding and influencing the Bank Group. The information that follows will be periodically updated and we welcome your comments and suggestions.

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What is the World Bank Group?

 

The World Bank Group is really five separate institutions that are all overseen by a single President and a single Board of Directors.  Some parts of the Bank Group work with governments, while others deal directly with private companies.

 

The term “World Bank” is used to refer to two of the five institutions that make up the World Bank Group – the International Bank for Reconstruction and Development (IBRD), and the International Development Association (IDA) – both of which focus on governments.  The IBRD lends money to the governments of middle-income countries, such as China and Brazil, while the IDA provides loans and grants to the governments of the world’s 81 poorest countries.  Two other institutions in the World Bank Group, the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA), provide direct support to the private sector.  The IFC provides loans and financial services to private corporations, while MIGA is essentially a “political risk” insurance company for multinational corporations.  The fifth institution, the International Centre for Settlement of Investment Disputes (ICSID) provides a forum for the arbitration of investment disputes.  This handbook does not address the operations of ICSID. 

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What Does the World Bank Group Do?

 

The majority of the World Bank Group institutions (IBRD, IDA and IFC) are money-lending institutions.  The World Bank (IBRD and IDA) lends exclusively to governments and issues two types of loans: loans for specific projects (roads, dams, mines etc.), and structural adjustment or “policy” loans. ^[1]  The IDA, which lends to the poorest members of the World Bank, also provides countries with grants.  The IFC lends to private companies.^[2]

 

The Bank Group works closely with the International Monetary Fund (IMF) and the two institutions use their financial and analytical resources to influence the policies of their member governments, especially the poorest members. For instance, World Bank structural adjustment loans come with conditions attached, and these conditions can have a profound impact on the borrowing country. The IMF and the World Bank are also responsible for determining whether or not a country is eligible to receive debt cancellation. Since many countries around the world are burdened by an often illegitimate and unsustainable debt burden, the World Bank is able to condition debt cancellation on a country’s willingness to adopt policies that the Bank deems appropriate. 

 

The tremendous analytical resources at the disposal of the World Bank also puts the institution in a position to influence the direction of international aid. The World Bank routinely assesses whether or not it thinks a country’s policies are adequate and its institutions well managed. It uses these and other assessments to determine how much money a country is eligible to borrow. These assessments can also have a significant influence on the foreign aid budgets of high-income countries such as Canada, who rely on World Bank analyses when determining how they will divide up their own international aid budgets.

 

The World Bank also produces a wide range of research papers and sectoral analyses that have a major influence on debates related to country specific and broader development policy issues.^[3]

 

Finally, the World Bank Group (the IFC and MIGA) provides direct and indirect support to private businesses, often major multinational corporations, to build dams, roads, oil pipelines, open pit mines and infrastructure, among other things.

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How is the World Bank Group Structured?

 

The World Bank Group is owned by its member governments.  Each member has a voting power that is proportionate to the number of shares it owns.  This means, for example, that the United States controls about 16% of the voting power at the World Bank, while the more than 40 countries of Sub-Saharan Africa have a combined voting power of only 5.33%.

 

Ultimate decision-making authority at the World Bank Group is vested in the Board of Governors, where each member government sends one representative, usually a Minister of Finance, to speak on its behalf.^[4]  However, the ability of the Board of Governors to make decisions is quite limited; it is a large, cumbersome board which meets only once a year.  Most of the Board of Governor’s powers have accordingly been delegated to two smaller bodies: the Board of Executive Directors and the Development Committee.

 

The Member governments participate in day-to-day decision-making at the Bank through their representative on the Board of Executive Directors.  This Board is made up of 24 senior government officials elected or appointed by the member countries.  The Executive Directors have permanent offices at the Bank’s headquarters in Washington, and usually meet at least twice a week.  They formally approve loans, credits, projects and policies, discuss country strategies, and provide strategic advice to the Bank’s management team.^[5] 

 

Not every World Bank Group member has its own Executive Director, though each member is nominally represented by one. The five largest shareholders (the United States, Japan, Germany, France and the United Kingdom) each appoint their own Director, as do China, Saudi Arabia and Russia.  The other 16 Directors are elected to two-year terms by the remaining members, which are arranged into groups called constituencies. Canada belongs to a constituency that includes a number of Caribbean countries, Guyana and Ireland.^[6]  In practice, the Executive Director for this group is always Canadian, because Canada has almost 73 percent of the voting power in the constituency.

The Board of Executive Directors is chaired by the President of the World Bank Group, who is also responsible for the overall management of the Bank (see the organizational charts on the World Bank Group’s website)  The Bank's presidency is traditionally held by a national of its largest shareholder, the United States.

 

The Bank gets much of its strategic direction from the Joint IMF-World Bank Development Committee, which advises the Boards of Governors of both the IMF and the World Bank “on critical development issues and on the financial resources required to promote economic development in developing countries.”^[7]  While it is not an official decision-making body, the Development Committee is one of the key places where member governments express their positions on overarching policy questions.  Its composition mirrors that of the Boards of Executive Directors.  Canada is always represented on the Development Committee by its Finance Minister.

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How Does the World Bank Group Work?

 

The World Bank (IBRD and IDA) follows a basic cycle of first developing overall strategies for the country in question and then funding specific projects according to the priorities identified in those strategies.  It prepares a Country Assistance Strategy (CAS) for each borrowing country every one to five years.  This document is formally discussed and approved by the Board of Executive Directors, and provides an overview of the Bank’s planned operations in a country during the period covered.^[8]

 

In the case of poor countries, the CAS is supposed to be based on a Poverty Reduction Strategy Paper (PRSP), which is prepared by the country’s government, ideally in consultation with civil society and the private sector.^[9]  All countries that wish to borrow from IDA, or to secure World Bank/IMF debt cancellation, are required to produce a PRSP.^[10]  In reality, these strategies are heavily influenced by the Bank/IMF, and are subject to the endorsement of the Boards of these institutions.

 

Once a country assistance strategy is in place, the World Bank looks for prospective projects to fund (see the World Bank’s project database for a relatively complete list of projects).  There is a standard project cycle that begins with project identification, preparation, appraisal, negotiation and approval. In theory, there are a range of policies and procedures that are supposed to be applied to World Bank projects (including policies related to social and environmental issues and information disclosure). However, the Bank has consistently refused to apply many of its policies to its structural adjustment lending and it often fails to implement its policies during project preparation and implementation.

 

The IFC develops and reports on its projects independently from the World Bank and maintains its own policies and procedures (as does MIGA). However, both the IFC and MIGA employ a project cycle similar to that of the World Bank.

 

Almost all projects must receive the approval of the Board of Directors (some are approved on a “no objection” basis).  Once the project has been approved by the Board, it moves through the final two stages of the project cycle; implementation and evaluation.^[11]

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Where Does the World Bank Group Get its Money?

 

Except for IDA, all of the World Bank Group institutions have made a profit in every year of their existence.  The Bank’s original capital came from its member countries – each member country contributed a certain amount of money when they first joined the IBRD, IDA, IFC and MIGA respectively.  The amount countries actually pay, however, is only a small portion of their theoretical contribution.  For example, Canada owns 2.85 percent of the World Bank, which theoretically commits them to pay as much as $5.4 billion.  Of this amount, however, Canada has only paid $335 million.  The rest is called “callable capital” – money that the World Bank can call upon its members to pay if it ever finds itself in a financial crisis.

 

This enormous amount of callable capital (US$178 billion in total) makes the Bank an extremely secure financial institution, giving it an “AAA” credit rating.  Because of this, the Bank can borrow money by selling bonds on the international capital markets at extremely low interest rates.  This is where the IBRD gets almost all of its money for lending; it raised $19 billion this way in 2003.  It can then profitably lend to its members at interest rates that are still favourable, but higher than at what it borrows.

 

As noted above, the IDA is the one World Bank Group institution that does not make a profit.  It provides grants as well as long-term loans that are essentially interest free and, as a result, the donor community has to regularly give it more money to keep it operating.  Representatives of the donors, called the “IDA Deputies,” get together every three years to decide how much money each one will contribute in the coming years.  This process is called an “IDA replenishment.”^[12]  The IDA replenishment negotiations, however, are not just about contribution levels; they are also a forum where the rich countries make decisions about the direction that the institution as a whole is expected to take in the coming years.^[13]  Canada provides about $250 million a year to IDA.

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Who Speaks for Canada at the World Bank Group?

 

Three people speak for Canada at the World Bank Group.  The first is the Minister of Finance, who represents Canada on the Board of Governors and at the Development Committee.  In his/her unlikely absence, the President of CIDA would assume these duties as Canada’s Alternate Governor.  But in reality, the Minister of Finance spends very little time on matters related to the World Bank.  A much more active voice at the World Bank is Canada’s Executive Director who, as explained above, represents the Canada/Ireland/Commonwealth Caribbean constituency.  Finance Canada nominates a senior civil servant for this post, who is then formally elected by the group.   As a donor country, Canada also has an IDA Deputy, who is a senior civil servant in the International Trade and Finance Branch of the Department of Finance.

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Who Decides What Canada Says at the World Bank Group?^[14]

 

Ultimate responsibility for Canada’s representation at the World Bank Group lies with the Minister of Finance, but in reality most decisions are made by mid-level officials in the Department of Finance (see appendix A).  Items that require a vote of the Board of Governors, as well as items on the agenda of the Development Committee, will engage the attention of the Minister’s office, but most other issues will not unless they are politically sensitive.  The Minister usually holds a meeting with civil society prior to the April and September meetings of the Development Committee/Board of Governors.

 

For most matters, Canada’s opinion is conveyed to the Executive Director’s office by the International Institutions section of the International Trade and Finance Branch of Finance Canada, which coordinates the government’s policy related to the World Bank Group.  Other branches of Finance Canada are involved according to their specialization.  The government of Canada sends the Executive Director “comments,” which outline the position that Canada wants him or her to take on a given issue. 

 

Finance Canada consults CIDA an on-going basis, and to a lesser extent Foreign Affairs Canada, on issues related to the World Bank Group.  In each of these branches of government there is an individual responsible for liaising with Finance on World Bank issues:  in CIDA this is a Senior Program Manager in the International Financial Institutions division of the Multilateral Programs Branch; in FAC, an official in the Economic Policy Bureau (Economic Relations with Developing Countries Division) of the Strategic Policy Branch.  These officials will consult with relevant people within their departments when necessary.  Other departments may also be consulted on files that touch on their expertise.  For example, Natural Resources Canada was consulted extensively during the World Bank’s recent Extractive Industries Review. 

 

Most project proposals are not looked at in any depth in Ottawa; the Executive Director’s office analyzes the proposals and votes according to existing policy.  However, projects that are likely to be politically sensitive, or which push the limits of existing policy, are discussed between Finance and the Executive Director’s office, and may be referred up to the Assistant Deputy Minister for International Trade and Finance and perhaps further up the chain.

 

In terms of Parliamentary supervision, Finance Canada submits an annual report to Parliament on “Operations under the Bretton Woods and Related Agreements Act,” which outlines the operations of the institutions and the use of resources provided by Canada, and reviews the votes of Canada’s Executive Director and Governor over the preceding year.^[15]  This report does not usually generate much discussion.  The House of Commons Standing Committee on Foreign Affairs and International Trade and the Senate Committee on Foreign Affairs have mandates to review Canada’s participation in all international institutions, but do not frequently discuss matters associated with the World Bank.

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Tips for Civil Society

 

The Halifax Initiative Coalition is Canada’s leading CSO network on issues related to the World Bank Group. The Coalition is comprised of development, environment, faith, rights and labour groups working together to fundamentally transform the international financial system and its institutions, namely the World Bank, the IMF and export credit agencies. The Coalition encourages individual Canadians to get involved in their campaigns by joining their Rapid Response Network. Contact the Coordinator, Pam Foster, if you are interested in getting involved in the work of the Coalition.

 

Friends of the Earth Canada is working with the Coalition and some of its key members (such as MiningWatch Canada, the Social Justice Committee and Kairos) on an effort to draw attention to the impact of World Bank Group support for Canadian mining companies abroad.

 

Canadian CSOs meet with the Minister of Finance and the Canadian Executive Director in April and September in the run-up to the World Bank’s Spring and Annual General Meetings, and the staff of the Canadian Executive Director’s office are generally open to meeting with Canadian CSOs when they are in Washington. 

 

IFIWatchnet.org is a website designed to connect organizations worldwide that are monitoring international financial institutions such as the World Bank Group. It is a collaborative effort of more than 50 organizations from around the world.  The website maintains a calendar of upcoming events and an archive of documents and films/videos that are searchable by institution, topic, category and country.

 

The Bank Information Center is a Washington-based non-profit organization that provides information and strategic advice to organizations around the world on the policies and projects of the World Bank Group and other international financial institutions. BIC’s website provides regular updates on issues related to the international financial institutions and is organized by: region (Africa, Asia, Europe and Central Asia and Latin America); policies and issues, and; by institution (including the World Bank, the IFC and MIGA, among others).  

 

If you are interested in what the Bank is doing in a particular country, you might want to start by consulting the Country Assistance Strategy (CAS), available on the Bank’s website.  Second, find out what specific projects the Bank is implementing or preparing.  You can browse projects by region, country, goal, theme or sector on the Bank’s Projects Database.^[16]  As mentioned above, information on IFC and MIGA projects is kept separately on their respective websites.

 

The World Bank’s Monthly Operational Summary is a useful way of keeping track of the projects that the Bank is preparing in a given country.  It is available on the Bank’s website and it is supposed to list all of the projects being prepared by the IBRD and IDA from the time they are first identified until the loan is approved or the project dropped.

 

In general, you should familiarize yourself with the Disclosure Policy of the relevant institution (the IBRD and IDA have a common disclosure policy, but MIGA and IFC have their own).  Depending on the kind of project or loan that you are looking at, the Bank may have to prepare various social and environmental assessments (such as a resettlement plan or an environmental impact assessment), so you should try to determine if this is the case and when they will be produced and disclosed. These documents should be available on the Bank’s projects database once they are released.

 

There is sometimes a difference between what is officially available and what information can actually be accessed with some creative effort.  It is a good idea to contact NGOs with more experience in this area to find out how information might be accessed through unofficial channels. 

 

Almost all World Bank projects must receive the approval of the Board of Executive Directors.  If there are concerns about a project, however, CSOs should not wait until a project comes up for Board approval to engage the process; by this time it will be very difficult to have any impact on project design.  It is important for CSOs to know what documentation is generated during the project cycle, and how to track it – including where to watch for upcoming projects.  There is a concise description of the project cycle on the World Bank’s website,^[17] and a detailed index of the public availability of documents on the Infoshop website.^[18]  A more descriptive guide has been produced by the Bank Information Centre.^[19]  For more specific information, check the information disclosure policy of the institution concerned, available on their websites.

 

Do not hesitate to just pick up the phone and call the World Bank.  If you call 1-202-737-7752, you will get a switchboard operator.  Just ask for the “country desk” of the country you are looking for, and they will put you right through to someone. 

 

The Bank and the Canadian government seem to be particularly responsive to the media on these issues.  If it is possible to draw press attention to your issue, it can be very helpful. 

 

Members of Parliament do not often take an interest in issues related to the World Bank, but if you can get their attention, they can help to bring some profile to the issue as well.  Final decisions related to Canada’s contribution to the IDA replenishments provide a good opportunity to do this.  The Minister must sign off, and Parliament must give its approval.^[20]  This is one opportunity to get Members of Parliament engaged in relevant policy issues, but remember that their approval comes after the IDA replenishment negotiations are complete.

 

During the April and September Bank meetings, civil society organizations tend to come together in Washington or wherever the meetings are being held.  Outside of the meetings there are usually workshops, teach-ins and demonstrations.  Inside, a series of meetings are held with Executive Directors and World Bank officials about issues of concern.  This is a good opportunity to become more familiar with the variety of work going on in civil society around the World Bank, as well as the expertise that exists.

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Conclusion

 

Friends of the Earth Canada hopes that this handbook will serve as a useful point of reference for organizations interested in better understanding and influencing the World Bank Group. The handbook is a work in progress that will be periodically updated with a view to better serving the needs of civil society organizations in Canada and beyond. We want to encourage readers to provide feedback and advice on how to improve this Working Draft. Please send any questions and comments to gsaul@foecanada.org.

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