Is the World Bank's Inspection Panel working the way it should?

By Jeff Tyson 10 November 2015

Bimbo Omowole Osobe stands in front of what used to be her home. The Badia East slum was demolished and its residents evicted to make way for a new housing development in an urban renewal zone financed by the World Bank in Lagos, Nigeria. Photo by: George Osodi / The International Consortium of Investigative Journalists / CC BY-NC-ND

Human rights advocates, civil society leaders and even the mainstream media have cast heavy criticism at the World Bank for its treatment of high-profile human rights abuse cases linked to bank-financed projects.

In Uzbekistan, a World Bank financed project supported a cotton industry notorious for child labor and forced labor. And in Nigeria, government authorities evicted approximately 9,000 Lagos slum residents from their homes during the implementation of a World Bank urban development project.

In both cases, the World Bank’s Inspection Panel — the independent accountability mechanism designed to ensure the global financial institution complies with its operational policies and procedures — declined to conduct a formal investigation.

Many have asked, why?

Critics allege the Inspection Panel is neglecting its role as an arbiter of high-stakes disputes and failing to adequately educate communities about their rights to compensation when harm occurs.

But supporters of the Inspection Panel’s recent decisions to forego the investigation process say it has taken the right approach in these cases, and that in doing so the panel has achieved faster results at less cost.

Devex dug into the policies and tradeoffs that guide the Inspection Panel’s decisions, gathering the perspectives of panel staff and other bank stakeholders to understand how the panel is meant to work, whether it is achieving its goals, and what that means for accountability at the world’s largest international financial institution.

Uzbekistan

On September 5, 2013, three human rights organizations submitted a complaint to the Inspection Panel asserting that a World Bank project supporting the agriculture sector in Uzbekistan failed to identify risks of child labor and forced labor linked to cotton harvesting in the country.

The complaint accused the bank of perpetuating a government-induced, countrywide problem of forced labor, including of children under 16 years old in the country’s sprawling cotton fields.

More than two years later, on January 23, 2015, the board approved the Inspection Panel’s recommendation not to conduct a formal investigation.

To human rights advocates, the panel’s decision not to investigate was alarming.

“The World Bank has not done enough to prevent forced labor linked to its agricultural loans,” said Human Rights Watch’s senior international financial institutions researcher Jessica Evans. “The Inspection Panel has turned its back on Uzbekistan’s forced laborers, in exchange for promises from bank management.”

For activists including Umida Niyazova, director of the Uzbek-German Forum for Human Rights — one of the primary complainants in the case — the decision not to investigate sent a signal to the Uzbek government that its system of forced labor can continue.

When violations of bank policy are not formally investigated by the Inspection Panel, people who have been harmed by bank projects have nothing to point to for “external validation” of wrongdoing, Accountability Counsel Executive Director Natalie Bridgeman Fields told Devex.

Further, formal investigations serve a critical role in promoting learning at the World Bank and within the board by establishing a “systemic level of accountability,” Fields said.

So why would the Inspection Panel recommend against a formal investigation?

One important thing to understand about how the Inspection Panel works is that it investigates relatively few of the cases it receives. In fact, of the 104 total complaints the panel has received since its inception, just 34 to-date have been investigated.

What you need to know about the World Bank’s Inspection Panel

How does the world's largest multilateral donor deal with cases of alleged abuse linked to development projects? Here's what you need to know about the World Bank's Inspection Panel and how it works.

One reason that the Inspection Panel may decide not to pursue a formal investigation of a case is if the panel considers World Bank management’s response to a complaint and management’s proposed plan of action to be adequate.

As a 1999 clarification to the resolution establishing the panel states, “the Inspection Panel will satisfy itself as to whether the bank’s compliance or evidence of intention to comply is adequate, and reflect this assessment in its reporting to the board.”

In the case of Uzbekistan, the panel registered the complaint, and in response, bank management asserted that their project played no role in causing or supporting human rights abuses, yet recognized the human rights concerns raised in the complaint as serious.

Bank management proposed to implement third-party monitoring of child and forced labor across the bank’s portfolio and stressed its efforts — in collaboration with international partners — to convince the government of Uzbekistan to comply with international standards on child and forced labor.

Inspection Panel members visited the project area to meet with all stakeholders. It determined that the complaint met the criteria for an investigation, yet decided to give bank management one year to address the concerns of the complainants and pursue its action plan.

A progress report that bank management submitted a year later noted that all bank project documents were revised to require compliance with national and international laws against forced labor and child labor. And it indicated that the International Labor Organization would carry out third-party monitoring of child and forced labor in bank-financed projects beginning in 2015 for a two-year period.

Bank management also committed to supporting the diversification and modernization of the cotton sector and to include labor issues as part of its discussions on agriculture with the Uzbekistan government.

The panel, recognizing the specific efforts of bank management to prevent forced labor and child labor, as well as management’s commitment to report to the board, recommended against an investigation, noting however that future complaints based on new evidence could be considered.

For panel staff, the Uzbekistan case is representative of success — of learning on the part of bank management, and of necessary action and progress toward modernizing the cotton industry in Uzbekistan.

The U.S. State Department’s 2015 Trafficking in Persons Report released on July 27 promoted Uzbekistan from Tier 3 to Tier 2 on its watch list — reflecting some of the progress made in the country’s cotton industry. The report noted the government’s agreement with the World Bank and the International Labour Organization to allow ILO to monitor the cotton harvests in five World Bank-funded project locations from 2015 to 2017 — areas which make up about 60 percent of cotton producing territory in the country according to the report.

Still, the Uzbek government has much more to do to improve its human rights record. The State Department’s report highlights the continued problem of adult forced labor, the lack of enforcement of new child labor laws in certain regions, and the detaining and threatening of “at least two” human rights activists in the country.

Still, the bank’s watchdog points to improvement.

“Thanks to the case, and the dialogue of the bank, we saw important policy changes,” Inspection Panel Chairman Gonzalo Castro de la Mata told Devex. “Whereas the trajectory before was to continue using children to pick up the cotton, now they’re moving into a new direction, to modernize the cotton industry, to mechanize and to diversify.”

Dilek Barlas, executive secretary of the Inspection Panel said the Uzbekistan case had “considerable impact,” and emphasized the positive impact is what is important — not whether the case went to an investigation.

Nigeria

On September 30, 2013, the panel received a complaint from a Lagos, Nigeria based NGO asserting that approximately 9,000 residents living informally in the Lagos slum known as Badia East were forcibly evicted from their homes and their homes were destroyed by the Lagos state government.

The complaint asserts that this forced eviction occurred during the implementation of the World Bank supported Lagos Metropolitan Development and Governance project and that the bank failed to ensure the Lagos government’s compliance with the project’s financing agreement. It was submitted on behalf of individuals and families in the Badia area who claimed they were not consulted, provided notice of their evictions, nor provided resettlement or compensation.

In July 2014, the panel concluded not to register the case and therefore not to pursue an investigation. Their reason this time was to implement a new strategy — a pilot approach the Inspection Panel designed to achieve faster results.

The new “pilot approach to support early solutions” was created to provide an opportunity for both requesters and World Bank management to address the concerns highlighted in a complaint and come to an agreed upon solution before triggering a formal investigation. It is meant to be applied to cases where all stakeholders agree that an early solution is possible.

In the case of Lagos, the panel reviewed the situation and deliberated with both bank management and affected community members. The panel ultimately decided to delay registration and pursue the new pilot approach “based on a willingness of both the requesters and management to provide an opportunity to resolve the concerns raised,” according to case documents.

The World Bank advised the government of Lagos State to adopt a Project Resettlement Policy Framework and the government agreed to implement a Resettlement Action Plan for the case at hand.

Bank management committed to process all project-affected individuals who were not yet cleared for compensation, monitor their payment to ensure compensation was received, resolve outstanding grievances, offer vocational training opportunities, and compile a report for the board of executive directors.

In May 2014, members of the Inspection Panel traveled to Lagos to meet with complainants and affected individuals. They found that a majority of the 9,000 displaced people received compensation and that a majority of eight community representatives agreed with the government’s Resettlement Action Plan, according to the panel’s 2015 annual report.

In July of that same year, the panel concluded not to register the case and therefore not to pursue a formal investigation.

“We walked in the slum and we could see how difficult it is — the conditions in which those people live and how important it was for them to get the compensation in an urgent basis,” Castro de la Mata said. “So I’m personally gratified that we did that.”

Inspection Panel Chairman Gonzalo Castro de la Mata talks about the Inspection Panel’s new “pilot approach to support early solutions.”

Following the decision not to formally investigate however, civil society groups and human rights organizations spoke out against the new pilot approach.

In a letter to World Bank President Jim Yong Kim and then Inspection Panel Chair Eimi Watanabe, representatives from 21 civil society organizations called for an “immediate suspension” of the pilot program.

The letter said that compensation for evicted individuals in Lagos wasn’t sufficient to secure alternative housing and criticized the panel for introducing the pilot without the approval of the board. It accused the pilot of preventing learning at the World Bank, preventing access to the panel process, causing more harm than good, and diverging from the panel’s mandate.

In its own statement, human rights NGO Amnesty International said the pilot resulted in support for a Resettlement Action Plan “that falls short of international human rights standards and the bank’s own policy.” 

Critics of the panel’s recommendation to delay registration of the case and ultimately not to investigate point to the fact that two of the original three requesters asked for the case to be investigated prior to the panel’s final decision.

This communication however did not come from the Social and Economic Rights Action Center — the original NGO that submitted the complaint. Rather, the two requesters informed the panel they had designated a new representative. And shortly thereafter, SERAC — the original representative NGO — wrote to Panel members telling them that the Badia East community was satisfied with the Resettlement Action Plan as well as with the pilot process of the Inspection Panel.

With conflicting communications, the panel ultimately decided to listen to the agreed upon representative — SERAC and eight community spokespersons — and not pursue an investigation.

The panel responded to the 21 CSOs criticizing the pilot program and to Amnesty International. It pointed to a bank case study on the project and its relevance to the urban renewal sector as an example of institutional learning, noted requesters had “full access to the panel at all times,” and pointed to prompt payment of evictees as a positive outcome, “particularly in a context where the evictees are considered illegal squatters by local law.”

Still, some civil society representatives maintain that the Inspection Panel needs to do a better job at educating community members of their rights and resolving high-stakes disputes.

Natalie Bridgeman Fields, executive director of Accountability Counsel, told Devex that the pilot approach in Nigeria “let bank management unilaterally offer a package” and that it was a “take it or leave it type of an option.”

Fields added that the Inspection Panel should have better ensured that the community members understood their options in terms of the rights they are entitled to under bank policy. Instead, Fields said, the result was a “disaster” and the community was divided in a way that was “unnecessary and avoidable.”

“On paper, without understanding the context, the pilot may look acceptable,” Fields said. “But in reality it’s really devoid of all the protections that every single other accountability mechanism has.”

Fields stressed that the Inspection Panel is the only accountability office of its kind with no formal dispute resolution function — a capability that would allow the panel to bring in neutral professionals to address “concerns through a mutually agreeable process.”

Creating such a function would be up to the bank’s board of directors, but that seems unlikely to happen soon. As Fields pointed out, the board is in the middle of a review of the bank’s social and environmental safeguards and is in a difficult position at the moment to think about adding a new feature to the Inspection Panel.

According to Castro de la Mata, the pilot approach was never meant to serve as a dispute resolution function, but as a tool to allow bank management and requesters to come to quick solutions.

Defining success

Success of the Inspection Panel process means two things, according to Castro de la Mata. First, redress for those harmed by a bank project. And second, learning.

“The institution has to learn to avoid making the same mistakes again,” Castro de la Mata said.

But as the cases in Uzbekistan and Nigeria highlight, coming to clear conclusions about what exactly amounts to sufficient redress and learning can be difficult.

In which cases, for example, is redress needed quickly? And in which cases does redress require full-fledged panel investigations and professionals trained in dispute resolution?

If the World Bank is going to lift people out of extreme poverty, it’s going to be working in places with weak institutions and high risks. Countries seeking growth will continue to prioritize large infrastructure projects, and the bank has to take risks to help its clients achieve their goals, Castro de la Mata acknowledged.

“So if you take risks, some things will go wrong,” the chairman said. “And that’s when we come and we try to find out how it could be better next time.”

Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you FREE every business day.

About the author

Jeff tyson 400x400  1
Jeff Tyson@jtyson21

Jeff is a global development reporter for Devex. Based in Washington, DC, he covers multilateral affairs, U.S. aid and international development trends. He has worked with human rights organizations in both Senegal and the United States, and prior to joining Devex worked as a production assistant at National Public Radio. He holds a master's degree in journalism from Columbia University and a bachelor’s degree in international relations and French from the University of Rochester.


Join the Discussion