World Bank safeguards: Pushing more money out the door at the expense of the poor?

By Natalie Bugalski, David Pred 05 August 2014

The World Bank headquarters in Washington, D.C., United States. The financial institution’s new environmental and social safeguards could mean less accountability and protection for people displaced by its programs. Photo by: Eliza Villarino / Devex

Last week, the World Bank released a draft of its proposed new environmental and social safeguards.

While over a hundred civil society groups, development practitioners and professional associations denounced the draft as a significant roll-back of standards, Devex reported last week how Kyle Peters, vice president for operations policy and country services, defended the proposed new rules because they “will uplift sustainable development” and represent “a strengthening of existing policies.”

However, after a careful analysis of the draft, we think that Peters’ assertions are wrong.

Let’s take the example of involuntary resettlement. Every year, some 15 million people are uprooted from their land and homes to make way for development projects around the world. The risks of displacement for poor families are well documented: homelessness, loss of livelihoods, food insecurity, psychological trauma, economic and cultural marginalization, to name a few. It is by now well established that in order to avoid these impacts, strong resettlement safeguards must be in place.

There's a dearth of public information on the scale and impacts of displacement financed by the World Bank, or the effectiveness of its resettlement policy in achieving its objectives to date. Any credible policy review should be based on analysis of such information. But despite this, the bank is proposing to dismantle the fundamental architecture of its resettlement safeguards that has been in place since 1980 without presenting a shred of evidence that the changes will lead to better — and not worse — development outcomes.

Elimination of ‘front-end’ requirements

A hallmark of the bank's proposed new Social and Environmental Framework is the elimination of “front-end” safeguard requirements to make it simpler, quicker and cheaper to get projects approved.

Gone is the 34-year old requirement that borrowers must submit a comprehensive resettlement plan before the bank commits to financing a project that causes displacement. The proposed new standards permit borrowers to submit resettlement plans at some undetermined point in time — but after financing has been approved. By that point, the bank will have lost the vast majority of its leverage to ensure that the plans are capable of preventing harms to displaced families. Affected communities would also be deprived of the opportunity to provide input into project designs and resettlement plans before funds are disbursed.

Once the money is out the door, it's much less likely that the voices of impacted communities will be heard.

The draft also discards the requirement for thorough baseline socio-economic studies to be conducted prior to displacement. These studies are crucial to designing effective resettlement programs and preventing impoverishment, and without them it's impossible to measure the impacts of resettlement and whether the objective of improving — or at least restoring — affected people’s living standards has been met.

This tectonic policy shift is part of the move away from so-called “rules-based” safeguards to a more flexible approach.

The World Bank asserts that this will deliver better social and environmental outcomes, but provides no evidence to support this claim. In contrast, the bank’s Independent Evaluation Group has examined the evidence and found that rules-based safeguards have “helped to avoid or mitigate large-scale social and environmental risks financed by the bank.”

Gutting of monitoring and supervision requirements

While the bank has repeatedly claimed it wants to shift resources from project preparation to implementation, we find nothing in the draft that indicates more robust oversight and support for borrowers to ensure that safeguard objectives are met.

In fact, monitoring and supervision procedures have been gutted alongside the front-end safeguards.

The bank procedures currently in force recognize the “importance of close and frequent supervision to good resettlement outcomes” and include detailed supervision requirements during implementation through to completion. These detailed procedures have been removed, and the bank’s role has been reduced to little more than reviewing progress reports and self-evaluations submitted by borrowers.

Gaping loopholes

For a borrower looking for a way to evade the safeguard requirements, the draft is littered with loopholes.

To name just a few, if the bank finances a project with multiple “sub-projects” that involve displacement, the resettlement safeguards only apply if the borrower classifies the sub-project as having a “high” social risk — a classification that is undefined in the draft. Sub-projects classified as having a “substantial risk” (also undefined) need only comply with national regulations. That may be fine for countries with their own strong land management laws and systems, but this is extremely rare among World Bank client countries.

If there is cofinancing with another agency — which is frequently the case for big projects that cause large-scale displacement — the borrower and financiers can agree on a “common approach” to managing risk. Rather than requiring the higher of the applicable standards, the draft ambiguously states that the common approach “will not materially deviate from the objectives” of the World Bank standards, allowing for considerable discretion with minimal accountability. The same loophole is available to financial intermediary clients, such as private banks and equity funds.

Also, to the outrage of indigenous peoples organizations and support groups, borrowers can also opt-out of applying the indigenous peoples safeguards in certain circumstances, a provision that undermines international human rights standards and is thus open to abuse.

Abdication of World Bank responsibility

Mark King, the bank’s chief environmental and social standards officer, said last week that “we’re trying to be clearer in knowing who’s responsible for doing what for our projects.”

But he didn't mention that the proposed new framework eliminates the fundamental principle — long embedded in the bank’s safeguard policies — that the bank shares responsibility with the borrower for avoiding and mitigating the social and environmental risks of the projects it makes possible. The draft transfers all responsibility for compliance with the standards to the borrower, exonerating the World Bank from its obligations to the people displaced by its projects.

At the same time, the rules for the borrower are nebulous and elastic. Compliance has become an open-ended affair, required only “in a manner and time-frame acceptable to the bank” — which gives staff total discretion to decide when compliance is met and by what standard.

All of this would mean that, if the safeguards draft is adopted, the Inspection Panel would have no hard rules against which to hold the World Bank accountable. Communities displaced or otherwise harmed by bank projects would be left with little recourse.

We agree with Peters that the bank’s safeguards have not been “watered down” with this draft. They’ve been drowned to death.

Join the Devex community and access more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.

About the authors

Natalie bugalski
Natalie Bugalski

Natalie Bugalski is co-founder and legal director of Inclusive Development International. A human rights lawyer with expertise in housing, land and property rights, over the past decade Bugalski has done advocacy work on land tenure policy, resettlement and displacement issues at local and international level, including U.N. agencies, ADB and the World Bank.


David pred profile
David Pred

David Pred is co-founder and managing director of Inclusive Development International. An advocate and organizer for land, housing and natural resource rights, Pred has worked to support grassroots movements across the world to hold governments, corporations and financial institutions accountable for land grabs and related human rights violations.


Join the Discussion