Fears grow World Bank board could 'compromise' on accountability reforms

LONDON — Civil society groups have urged the World Bank’s board of directors to give its inspection panel tougher powers in order to effectively hold the institution to account, as a long-delayed review looks set to end in “compromise.”

After nearly two years of deliberations, insiders told Devex that the bank’s board plans to finalize a package of reforms to the panel ahead of the upcoming annual meetings in October.

As the institution’s main tool to address potential environmental and social damage to local communities resulting from bank-supported projects, the review is intended to ensure it can “operate effectively” under the bank’s new environmental and social framework, launched in 2018 following years of debate.

Created in 1993, the panel — which responds to complaints from affected communities — was the first of its kind among international financial institutions and triggered other organizations to follow suit. To date, it has considered nearly 140 complaints from over 50 countries.

A working group of the bank’s directors has been reviewing the panel’s powers since 2017 and agreed on some uncontentious reforms last year, including formalizing its advisory role and coordination with co-financiers’ accountability mechanisms.

However, civil society groups and former panel members say they do not go far enough. They want the board to approve three further reforms — specifically the ability to monitor management action plans; a dispute resolution function independent of bank management; and an extended eligibility timeline for communities to file complaints of up to two years after a project completes or a loan closes.

Without these tools, the panel “remains under-equipped as an independent accountability mechanism,” according to an open letter sent to the board by accountability groups.

They also point out that most other development finance institution accountability mechanisms already have these powers.

“These are not blue sky ideas … They are based upon experience across a number of institutions … and it’s an opportunity for the bank to catch up with its sister institutions which are now ... providing this kind of accountability … better than the bank does,” former panel member Richard Bissell told Devex.

To date, the board has been deadlocked on the issues, facing strong opposition from some borrower countries and the bank’s management.

Now, after months of delay, the board finally looks set to make a decision. Jürgen Zattler, executive director for Germany at the bank, and chair of the board’s committee on development effectiveness, which is leading the panel review, said he anticipated a “compromise” could be reached ahead of the annual meetings in October.

“Finding a solution is very difficult … There is some willingness to move forward but it needs … compromise from all sides,” Zattler said.

Accountability advocates said they fear that such a compromise will mean the panel remains weak.

Controversies

The debate comes amid a series of high-profile attacks on the bank’s accountability record. Its private sector arm — the International Finance Corp. — was recently criticized by U.S. lawmakers and is mired in a legal case over an Indian coal project, which has escalated to the U.S. Supreme Court.

The board is also reviewing another accountability tool — the Compliance Advisor Ombudsman, IFC’s watchdog. David Hunter, professor of international and comparative environmental law at American University's Washington College of Law, said the board’s decisions regarding the inspection panel could influence what it does with CAO.

“The board’s skepticism towards the panel reflects a skepticism towards accountability mechanisms more generally and suggests that [the] board could politicize the CAO reform process,” he warned.

Monitoring powers

Enabling the panel to monitor bank action plans has proved the most controversial reform, a number of sources told Devex.

Under the current system, the panel investigates eligible complaints and reports its findings to the bank’s board of executive directors. The bank’s management then draws up an action plan for how it will respond but the panel does not play an automatic monitoring role to ensure the plans are followed.

Automatic monitoring has faced strong opposition from borrower countries, especially India, which has faced panel investigations in the past, and China. Opponents fear it could lead to excessive meddling by the panel, while bank staff are also reluctant to “lose control,” Bissell said.

By contrast, European and U.S. shareholders are understood to be supportive of the proposed reforms. The U.S. has been especially vocal about the need to strengthen the panel.

Bissell noted that CAO has monitoring powers for IFC and that, without it, “the board is saying it will take any report from the bank’s management at face value and never question whether management may be fudging.”

Last year, the bank’s Independent Evaluation Group accused bank managers of failing to properly implement its own action plans, although the bank’s then CEO, Kristalina Georgieva, defended its performance.

The panel has also had to reopen old cases — including the Yacyretá hydropower project in Paraguay that was first investigated in 1996 — after complaints that the bank was not making good on its promises of redress.

Although some within the bank may perceive automatic monitoring powers as a risk, “the bigger risk for the Board and the Bank is to under-monitor and learn belatedly that little or no action has been taken in implementing Board-authorized actions deemed necessary to cure Bank non-compliance,” Hunter said.