[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




                       THE 15th REPLENISHMENT OF
                     THE INTERNATIONAL DEVELOPMENT
                     ASSOCIATION (IDA) AND THE 11th
                          REPLENISHMENT OF THE
                    AFRICAN DEVELOPMENT FUND (AfDF)

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 18, 2008

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 110-121





                     U.S. GOVERNMENT PRINTING OFFICE

44-186 PDF                 WASHINGTON DC:  2008
---------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office  Internet: bookstore.gpo.gov Phone: toll free (866)512-1800
DC area (202)512-1800  Fax: (202) 512-2250 Mail Stop SSOP, 
Washington, DC 20402-0001


















                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            DEBORAH PRYCE, Ohio
CAROLYN B. MALONEY, New York         MICHAEL N. CASTLE, Delaware
LUIS V. GUTIERREZ, Illinois          PETER T. KING, New York
NYDIA M. VELAZQUEZ, New York         EDWARD R. ROYCE, California
MELVIN L. WATT, North Carolina       FRANK D. LUCAS, Oklahoma
GARY L. ACKERMAN, New York           RON PAUL, Texas
BRAD SHERMAN, California             STEVEN C. LaTOURETTE, Ohio
GREGORY W. MEEKS, New York           DONALD A. MANZULLO, Illinois
DENNIS MOORE, Kansas                 WALTER B. JONES, Jr., North 
MICHAEL E. CAPUANO, Massachusetts        Carolina
RUBEN HINOJOSA, Texas                JUDY BIGGERT, Illinois
WM. LACY CLAY, Missouri              CHRISTOPHER SHAYS, Connecticut
CAROLYN McCARTHY, New York           GARY G. MILLER, California
JOE BACA, California                 SHELLEY MOORE CAPITO, West 
STEPHEN F. LYNCH, Massachusetts          Virginia
BRAD MILLER, North Carolina          TOM FEENEY, Florida
DAVID SCOTT, Georgia                 JEB HENSARLING, Texas
AL GREEN, Texas                      SCOTT GARRETT, New Jersey
EMANUEL CLEAVER, Missouri            GINNY BROWN-WAITE, Florida
MELISSA L. BEAN, Illinois            J. GRESHAM BARRETT, South Carolina
GWEN MOORE, Wisconsin,               JIM GERLACH, Pennsylvania
LINCOLN DAVIS, Tennessee             STEVAN PEARCE, New Mexico
PAUL W. HODES, New Hampshire         RANDY NEUGEBAUER, Texas
KEITH ELLISON, Minnesota             TOM PRICE, Georgia
RON KLEIN, Florida                   GEOFF DAVIS, Kentucky
TIM MAHONEY, Florida                 PATRICK T. McHENRY, North Carolina
CHARLES WILSON, Ohio                 JOHN CAMPBELL, California
ED PERLMUTTER, Colorado              ADAM PUTNAM, Florida
CHRISTOPHER S. MURPHY, Connecticut   MICHELE BACHMANN, Minnesota
JOE DONNELLY, Indiana                PETER J. ROSKAM, Illinois
ROBERT WEXLER, Florida               KENNY MARCHANT, Texas
JIM MARSHALL, Georgia                THADDEUS G. McCOTTER, Michigan
DAN BOREN, Oklahoma                  KEVIN McCARTHY, California
BILL FOSTER, Illinois                DEAN HELLER, Nevada
ANDRE CARSON, Indiana

        Jeanne M. Roslanowick, Staff Director and Chief Counsel




















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 18, 2008................................................     1
Appendix:
    June 18, 2008................................................    43

                               WITNESSES
                        Wednesday, June 18, 2008

Beckmann, David, President, Bread for the World Institute........    24
Bell, Edward, Senior Program Advisor, International Alert........    27
Lowery, Hon. Clay, Assistant Secretary for International Affairs, 
  United States Department of the Treasury.......................     7
Molina-Gallart, Nuria, Policy and Advocacy Officer, European 
  Network on Debt and Development................................    25
Udall, Lori, Senior Advisor, The Bank Information Center.........    29

                                APPENDIX

Prepared statements:
    Carson, Hon. Andre...........................................    44
    Waters, Hon. Maxine..........................................    46
    Beckmann, David..............................................    49
    Bell, Edward.................................................    52
    Lowery, Hon. Clay............................................    60
    Molina-Gallart, Nuria........................................    65
    Udall, Lori..................................................    71

              Additional Material Submitted for the Record

Frank, Hon. Barney:
    Letter from Peter Bakvis, Director, ITUC/Global Unions.......   106
    Wall Street Journal article entitled, ``Report on World Bank 
      Sees Deregulation Bias,'' dated June 13, 2008..............   108
    Letter from Hon. Clay Lowery providing additional information 
      for the record.............................................   109



















 
                       THE 15th REPLENISHMENT OF
                     THE INTERNATIONAL DEVELOPMENT
                       ASSOCIATION (IDA) AND THE
                       11th REPLENISHMENT OF THE
                    AFRICAN DEVELOPMENT FUND (AfDF)

                              ----------                              


                        Wednesday, June 18, 2008

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:03 a.m., in 
room 2128, Rayburn House Office Building, Hon. Barney Frank 
[chairman of the committee] presiding.
    Members present: Representatives Frank, Waters, Sherman, 
Baca, Scott, Green, Cleaver, Moore of Wisconsin, Ellison, 
Klein, Carson; Bachus and Feeney.
    The Chairman. This hearing of the Committee on Financial 
Services will come to order.
    One of the most important but least noticed parts of this 
committee's jurisdiction is our jurisdiction over the 
relationships between the United States Government and the 
various international financial institutions, which is one that 
I am very pleased that we have. In the Senate, the jurisdiction 
is in the Foreign Affairs Committee, but here it is in the 
Financial Services Committee. One strong reason for that is 
that under our statutory scheme, the American representatives 
to those institutions are affiliated with the Treasury, and the 
Secretary of the Treasury has the major impact, and I think 
that is appropriate.
    This committee has a history of a lot of concern in this 
area. In the previous Congress, when the Republicans were in 
the Majority, at the initiation of then-Chairman Leach, the 
current Ranking Member Mr. Bachus, myself, and Ms. Waters, four 
fairly senior members of the committee, we got together to push 
debt relief, frankly, over the objections of the Republican 
leadership in the House, the Democrat leadership in the House, 
and the Clinton Administration. People say, ``I don't like to 
say I told you so,'' but I do, and we did, and we were right. 
And debt relief has been very successful.
    We recently, in a totally bipartisan way, initiated a 
second round. In the Congress before that, when the Democrats 
were last in control, we took some action that led, I believe, 
to the establishment of the inspection panels by dragging our 
feet on funding the tranches, and we also, I think, had a good 
impact on openness and transparency.
    We have recently addressed in the Jubilee Act, in a 
bipartisan way, a set of views on conditionality. Again, it was 
a bipartisan one. I commend people to look at the comments that 
this committee added, not the comments, but the legislation 
regarding conditionality. It is a very bipartisan piece of 
legislation. Some of the language was suggested by each side.
    This brings us to two of the issues we have today. I 
believe that we are much better off having these institutions 
than not. I think there have been significant improvements. In 
fact, when we were considering this in the 1990's, we were in 
the midst of the 50 Years Is Enough campaign. While 50 years 
may have been enough, 60 years doesn't appear to be, because I 
am pleased that we do not now have the strong argument from 
many of the NGOs that the time had come to abolish the World 
Bank and the IMF.
    The IMF is, I will acknowledge, in a bit of a search. It is 
less clear than it used to be just exactly what it is the IMF 
is supposed to be doing because currency regimes have changed. 
But the need for development assistance to diminish poverty is, 
of course, as great as it ever was. So with regard to the World 
Bank, the International Development Association, the 
International Financial Corporation, and the other regional 
banks and their concomitant entities, that job is still very 
important. I remain very supportive, and I believe this 
committee is supportive as well.
    But there are two issues. I believe that 10 years ago and 
more, there was a serious ideological bias in the approach that 
was taken. The market obviously is a great developer of wealth, 
but an excessive faith in the market alone and a hostility to 
public-sector activity can be taken too far. I do believe that 
in the Asian crisis of about 10 years ago, the Clinton 
Administration was guilty of at first pushing the wrong 
remedies.
    We have evolved some, and I am pleased that the World Bank 
itself has issued principles that say that conditionality has 
gone too far. The IMF has acknowledged that. Structural 
adjustment is a thing of the past, theoretically, but there 
remain two problems. First, we have received strong evidence, I 
believe, that more conditionality survives than was supposed 
to, if you read the statements. Now some kinds of 
conditionality are very important. We embody in our Jubilee Act 
a mandate with regard to debt relief for what I would call 
procedural conditionality, for openness, for democracy, and for 
opposition to corruption. But there are public policy choices 
that ought to be made without coercion by the public elements.
    This committee did a trip to Africa, a bipartisan trip, and 
there was staff on both sides, and we heard in Ghana, for 
instance, which has been a very successful economic entity, 
complaints about excessive pressure to privatize their water 
system. I think there continues to be more conditionality than 
there ought to be, but less than there used to be. That is one 
of the things we will be concerned about.
    Second, we have the ``Doing Business'' report. The ``Doing 
Business'' report, it is clear, does have an impact on 
allocations, and contains ideological biases, in particular, 
the worker section. When countries are incentivized by the 
World Bank to cut down on vacation time and to lower pay, these 
are not appropriate measures for the World Bank to recommend. 
People can debate them or not. I would obviously be on the 
other side from many of them. But we are not here debating 
whether the World Bank is right or wrong to include these 
substantively, but procedurally. They just not should not be 
imposed on countries. When Saudi Arabia looks better than 
Sweden in some aspects because of employment practices, things 
have gotten very much out of hand.
    Those two areas we will continue to discuss: excessive 
conditionality of a substantive sort; and an intrusion of a 
bias with regard to worker rights and treatment of workers in 
the ``Doing Business'' report. Those are two of the issues that 
we will have before us.
    We have the legislative jurisdiction. I think it is time to 
do funding for the International Development Association and 
for the African Development Bank. The normal way these work, 
people should know--it has for some time been unwise to bring 
these to the Floor of the House. But this committee has 
developed the expertise, and we are in touch with the 
Appropriations Subcommittees on Foreign Operations in both the 
House and the Senate which do the actual legislating. The usual 
procedure I hope to follow here is that we will be marking-up 
our version of these next week, and we will be transmitting 
what we vote out to the Appropriations Subcommittees on Foreign 
Operations, and we will hope that they will be responsive. As I 
said, we will be looking in part at those issues.
    The final one--I appreciate the indulgence in time and I 
will give equal time to all--is the difficult issue with the 
fragile states. The first two, I think it is clear to me what 
we would like to see done and not done, at least to many of us. 
The fragile state issue is less ideologically charged, more a 
question of competence and specificity. We do want to guard 
against the possibility that fragility will invite even more 
intervention of the wrong kind. But the fundamental issue is 
what is the appropriate way to help fragile states, and that is 
one where we want to be totally cooperative and supportive in 
trying to figure out what to do.
    Now the ranking member, who has been from the time of the 
debt relief a leader in the effort to get policies that are 
truly responsive to the terrible needs of poverty in the world, 
the gentleman from Alabama.
    Mr. Bachus. I thank the chairman for holding what I think 
is a very important hearing on authorizing the United States' 
commitment to the International Development Association, the 
IDA, and the African Development Fund, thereby fulfilling our 
previous commitment to these 82 highly indebted poor countries.
    I want to associate myself with the remarks of the chairman 
when he said that this committee in a bipartisan way has been 
committed to supporting authorization and appropriation of 
these funds, which I believe are increasingly becoming more 
effective and now have an established track record of 
achievement and success in many of these countries.
    By fulfilling the United States' commitment to IDA 15, or 
the 15th replenishment of IDA, and to the AfDF 11, we fund two 
of the most effective vehicles for delivering aid to the 
world's most impoverished countries. As examples, in the last 
15 years, IDA contributions have helped rebuild--and these are 
just some specific examples--9,000 miles of roads in Ethiopia, 
tripled the number of girls attending Bangladesh secondary 
schools, and helped improve availability and access of 25 
million people in the world's poorest counties to safe drinking 
water and sanitation.
    For countries unable to borrow at market rates to meet the 
basic medical, educational, and nutritional needs of their 
peoples, both programs are a vital financial lifeline. Not even 
the strongest proponents contend that these programs are 
perfect, and today's hearing offers this committee an 
opportunity for oversight to work with the Administration, 
NGOs, the World Bank, and others to help strengthen and ensure 
that the funds that U.S. taxpayers contribute are being used 
wisely and effectively.
    In this regard, recent reforms undertaken by the IDA with 
encouragement from the United States and other donor nations 
are worth noting. Among other steps, the IDA has reevaluated 
the conditions placed on countries, improved its system for 
monitoring results, increased its role in engagement in fragile 
and postconflict states, and is working to become more 
transparent. As the chairman said, we have to be very careful 
with the conditions that we impose and how we impose those.
    Next week, the committee will consider legislation 
authorizing funding for both of these entities. It is my hope 
that we will fulfill our prior commitments to assist these 82 
heavily indebted countries and approve a bill free of new 
conditions that would weaken, not strengthen, the United 
States' voice within the World Bank.
    As I have said before, the cost of not acting is not just 
hopelessness, but increased political unrest throughout the 
world, because poverty creates a fertile environment for 
terrorism and corruption and creates the type of conditions 
that allow dictators to thrive. This sentiment is echoed in the 
report of the 9/11 Commission, which states: ``When people lose 
hope, when societies break down, when countries fragment, the 
breeding ground for terrorism is created.''
    I think there is general consensus among the Administration 
and both the Majority and the Minority in this Congress that 
this legislation is very consistent with our foreign policy 
objectives and really strengthens and helps us achieve those 
objectives.
    Mr. Chairman, the United States Government has pledged this 
funding. It is now up to Congress to authorize it. This is an 
important and noble task. We have an opportunity to make a 
difference over the long term to countries mired in poverty and 
strife. We should not turn our backs on this important work or 
on them.
    While I look forward to hearing the testimony of all of our 
witnesses, including Assistant Secretary Lowery and witnesses 
on our second panel, I want to extend a special welcome to 
David Beckmann, or Dave Beckmann, president of Bread for the 
World. Mr. Beckmann and I have worked together on providing 
assistance to developing countries in the past, and his book, 
``Grace at the Table,'' helped inspire me to become involved in 
this effort. He is, in many regards, a mentor to me.
    With that, Mr. Chairman, I thank you again for your 
leadership on this issue. You are an inspiration to others. I 
applaud you for holding this hearing, and I yield back the 
balance of my time.
    The Chairman. I thank the gentleman. I think our 
collaborative efforts in this area over a long period of time 
have really been one of the highlights of the committee's work.
    The gentleman from California is recognized for 5 minutes.
    Mr. Sherman. I have always been an extremely strong 
supporter of increased American effort to help the world's 
poor, and that is why nothing is more embarrassing to me than 
the World Bank and the stubborn effort of this Administration 
and others to funnel our scarce foreign resources, foreign aid 
resources, through the World Bank.
    We have a choice when we tax the American people and use 
those funds to help the world. We can funnel that money through 
the World Bank, through other international organizations, or 
directly through USAID and other organizations totally separate 
from the United States Government.
    There are those who are say that whatever flaws the World 
Bank has, if we don't put money in, the Europeans and the 
Japanese won't either, and they will cut their foreign aid. 
What an outrageous attack on the morality and ethics of the 
people of Europe and Japan to think that they would use our 
decision, a possible decision that I would advocate, not to use 
the World Bank institution, as an excuse to reduce their total 
aid to the world. They might join with us and decide to funnel 
their foreign aid through other organizations, but to use as 
the boogeyman that we have to fund the World Bank or Europe and 
Japan will immorally cut their efforts to the world's poor is 
an insult to our intelligence and to their morality.
    Why is the World Bank such an embarrassment? Why does it 
pose a great threat to all of us Members of Congress and others 
who support increased foreign aid? There are many reasons. I 
will focus on just one. That is the decision of the World Bank 
to loan $1.35 billion to the Government of Iran over the last 8 
years.
    We will be told that this is from the IBRD and not the IDA, 
and that if we in Congress are really stupid, we will think 
there is a big difference. Let's look at the World Bank Web 
site, the one before they took it down in order to hide the 
truth, the one they had up for many years, which says IBRD and 
IDA are run on the same lines. They share the same staff, the 
same headquarters, report to the same President, and use the 
same rigorous standards when evaluating projects. IDA simply 
takes its money out of a different drawer.
    A country must be a member of IBRD before it can join IDA. 
Let me quote again the words, ``They use the same rigorous 
standards when evaluating projects.'' Why would we take our 
scarce foreign aid dollars and route them through a staff who 
decides that one of the good uses of money is to send it to 
Tehran, and how are we supposed to go to our colleagues and 
urge them to vote for more foreign aid when we expose them to 
the risk that their constituents will notice that some of that 
money is going to Iran?
    I would say there are so many deserving organizations, so 
many ways in which we can support ending poverty in the world. 
For us to send the money to the World Bank is an abdication of 
our responsibility and imperils U.S. support for foreign aid.
    What does sending that money to Tehran do? It allows 
Iranian politicians to stand in front of water purification 
plants or sewage plants and cut the ribbon in the same way 
those in Congress know is so important to staying in power, 
because you have to bring home the bacon. I know it is not 
kosher, but you have to bring home the bacon. But what better 
way to illustrate to the Iranian people that the nuclear 
program of their country hardly cuts them off from the world, 
but rather that the whole world is sending money to that 
government. What better way to illustrate that they are losing 
nothing by building nuclear weapons than to cut the ribbon in 
front of a project funded by the World Bank, funded by an 
organization which is just one drawer away from a drawer in 
which we are being told to put more American money.
    Let us support our efforts to help the world's poor by 
stopping our involvement with the World Bank until it stops 
funding the Iranian Government. That is the only way to go back 
to our districts with a straight face, not having to hope that 
our constituents don't know what we are up to, but rather to be 
able to go back and honestly advocate for more foreign aid.
    I yield back.
    The Chairman. The gentleman from Texas.
    Mr. Green. Thank you, Mr. Chairman. I especially thank you 
for holding this hearing. I believe it to be exceedingly 
important.
    I have had the opportunity to travel to Darfur, Africa, and 
I have seen some of the conditions there that merit a lot of 
attention. But I have also had an opportunity, Mr. Chairman, to 
travel to Haiti, and Haiti is in our hemisphere, just off the 
coast of Florida. In Haiti, we have a poverty rate of about 80 
percent. We have about 70 percent of the people living off of 
$2 per day, or less; about 56 percent, more than 50 percent, 
live off of $1 per day, or less. They have the highest HIV/AIDS 
rate in the Western Hemisphere.
    In Haiti, they have five seasons. Of course, we have four. 
The fifth season is the hunger season, a time when they can 
predict hunger will exist to the extent that it will cause 
great pain and death to some people.
    So I am very pleased that this hearing is taking place 
because I am very much interested in what is happening just off 
the coast of Florida in a country that begs for help. They do 
not have a fishing industry. They are now becoming a staging 
point for drugs. They have large-scale corruption that is being 
dealt with. It is my hope that somehow we can see some help 
flow to a country that is so near to us and in desperate need 
of attention.
    Mr. Chairman, again, I thank you, and I thank the ranking 
member as well.
    I yield back the balance of my time.
    The Chairman. There being no further members--Ms. Moore has 
joined us. The gentlewoman from Wisconsin is recognized.
    Ms. Moore of Wisconsin. Thank you, Mr. Chairman.
    Thank you, panel, for joining us today for this very, very 
important issue of World Bank conditionality. This is something 
that is of real interest to me, given that the chairman has 
given me responsibilities as the committee's representative to 
the Parliamentary Network on the World Bank.
    I am very interested in your comments. I have more 
questions than I do answers. So with that, I will yield back 
the balance of my time.
    The Chairman. The gentleman from Indiana.
    Mr. Carson. Thank you, Chairman Frank and Ranking Member 
Bachus, for holding this hearing today regarding the 15th 
Replenishment of the International Development Association and 
the 11th Replenishment of the African Development Fund.
    As we consider these proposals today, we face critical 
questions about the effectiveness of current aid and how we can 
work to rebuild failed or fragile states. I am very pleased 
that the Administration sought significant increases in the 
U.S. contribution to IDA and for the African Development Fund. 
We must target these crucial multilateral resources towards 
fighting the HIV/AIDS epidemic across the globe, combating 
global climate change, stabilizing weakened governments, and 
addressing the global food crisis.
    Yesterday, I met with David Miner, chair of the board of 
directors for Bread for the World, and a highly respected 
member of the Indianapolis community and a very proud Hoosier. 
He highlighted the severity of the world food crisis and how 
important it is that we give weight to this problem in 
examining how global assistance through the IDA is directed.
    He said that the current food prices represent a 
significant setback that at this point he doesn't think the 
world community has fully realized the impact of, and I could 
not agree with him more.
    I would also like to add that during my recent trip to 
Haiti, I was deeply moved by those I saw suffering from extreme 
poverty and hunger. In a world with such wealth and resources, 
we must aggressively fight to make sure the resources we devote 
to foreign assistance can truly bring about the substantive and 
structural changes within governments to help those living at 
the margins of society.
    Further, I appreciate that since 2005, the World Bank has 
been increasingly open to suggestions about policy and has 
recognized to some extent the negative implications of imposing 
harsh conditionalities on recipient countries. Privatization of 
public services and user fees on secondary education, health 
care, and even water have not stimulated economic growth in 
these countries. Rather, they have served only to exacerbate 
the dire circumstances of the citizens within recipient 
nations.
    Lastly, I think it is very important to note that Chairman 
Frank has been a great leader in promoting transparency and 
accountability within the World Bank. I commend him for his 
work and would note how important it is for affected citizens 
to be able to weigh in on the policies imposed by the Bank and 
offer opinions on how to strengthen those policies.
    I would like to thank the witnesses today for attending, 
and I look forward to this important discussion. Thank you.
    The Chairman. We will now hear from a regular and welcome 
witness, the Assistant Secretary for International Affairs at 
the Department of the Treasury, Clay Lowery.
    Mr. Lowery.

STATEMENT OF THE HONORABLE CLAY LOWERY, ASSISTANT SECRETARY FOR 
INTERNATIONAL AFFAIRS, UNITED STATES DEPARTMENT OF THE TREASURY

    Mr. Lowery. Thank you, Chairman Frank, Ranking Member 
Bachus, Congresswoman Moore, and Congressmen Green, Carson, and 
Sherman. Thank you for the opportunity to discuss the 
Administration's request for the authorization of the United 
States to participate in the 15th Replenishment of the 
International Development Association, known as IDA.
    IDA is the main vehicle of the World Bank to support 82 of 
the poorest countries around the world by providing the largest 
source of interest-free loans, grants, and debt relief of any 
multilateral development institution. Our request for $3.7 
billion over 3 years represents a 30 percent increase over IDA 
14.
    Due to the shortness of time, I am not going to be 
discussing the African Development Fund replenishment, but I am 
happy to take any questions on that.
    There are a myriad of reasons to support the authorization 
and appropriations of IDA. Today, I want to highlight three: 
effectiveness; leverage and coordination; and U.S. foreign 
policy objectives.
    The bulk of development research suggests that for 
assistance to be effective, it should be country-driven, 
performance-based, and measured systematically for results. IDA 
is a leader in all three areas. Countries receive assistance 
from IDA that reflects their own priorities. IDA helps 
countries build the systems and capacity within governments to 
enable them to tackle barriers to growth and poverty reduction, 
working across sectors such as agriculture, education, 
infrastructure, and health. IDA is performance-driven, as the 
top-performing 10 percent of countries receive 7 times as much 
assistance on a per capita basis as the poorest-performing 10 
percent of countries.
    IDA is also the first international financial institution 
to systematically track the outcomes that countries achieve 
under their programs, such as educating girls. This measuring 
for results system provides greater accountability, as well as 
a valuable evaluative tool.
    IDA's effectiveness can be seen in such areas as IDA 
countries in the last 40 years--in IDA countries, people are 
living on average 15 years longer than they did; illiteracy has 
been cut in half over the past 30 years, from 50 percent to 25 
percent of the population; and 80 percent of children now 
complete primary education.
    There are many country-specific examples. I will just give 
you one. In Senegal, IDA supported the country's rural 
infrastructure projects, which improved roads, strengthened 
decentralization and financed microprojects, including water, 
schools, livestock, and other development needs. The results 
are that beneficiary households in the 110 participating rural 
communities reported a 25 percent increase in incomes. Markets, 
schools, and health facilities are now more accessible. 
Children now typically spend 10 minutes getting to school, 
instead of 30 minutes, and the weight and height under 3 years 
of age has improved.
    These efforts are being noticed. In a recent article Bill 
Easterly, who is a notable development expert and very harsh 
critic of development assistance providers, ranked IDA as the 
number one donor using best practices in aid in his evaluation 
of 39 multilateral and bilateral agencies.
    As a multilateral institution, IDA provides financial 
leverage for development resources. For every dollar the United 
States contributes to IDA, it is expected that $15 will be 
provided in loans or grants to those countries. IDA's leverage, 
though, is not simply financial. At a time when the average 
number of donors per country has grown from 12 in the 1960's to 
more than 30 today, IDA can support the country by providing 
coherence among donors and sharply reducing the transaction 
costs for recipient countries.
    IDA is also renowned for its convening power, as has been 
very evident lately, given Congressman Carson's question about 
the World Bank's response to increasing food prices. Through 
the effective leadership of President Zoellick, the World Bank 
has played a central role in galvanizing the international 
community to try to meet not only the short-term needs of many 
poor countries, but also advocating the appropriate policies to 
address ways to include agricultural productivity in the long 
run.
    The United States has a wide international reach, however, 
we can't do it alone. The greatest opportunities and the most 
serious threats to U.S. interests now come from the developing 
world. While IDA accounts for only a small amount of the 
Administration's foreign assistance request, its global reach 
and expertise make it a very effective instrument for advancing 
U.S. strategic objectives abroad.
    For instance, since 2002, the World Bank has committed 
$1.56 billion for 36 reconstruction projects and 3 budget 
support operations in Afghanistan, and just last week it 
committed another $1.1 billion over the next 5 years in 
Afghanistan. This assistance has helped rehabilitate schools 
and decentralize management to increase enrollment across 
grades, especially among girls.
    My boss, Secretary Paulson, is fond of saying that if the 
private-sector organization does not change with the times, it 
is likely to go out of business, whereas a public-sector 
institution is likely to become irrelevant.
    Thus, the United States uses the IDA replenishment 
negotiations as a platform to leverage reforms that we think 
are necessary to make the World Bank change with the times. 
Over the years, our forum agenda has taken IDA to new frontiers 
on measuring and achieving development results, delivering 100 
percent debt relief to potentially over 40 countries, securing 
grant finance for the poorest countries, and enhancing 
accountability and transparency. In the latest negotiations, we 
made a major effort on a number of areas that you all have 
commented on, such as working to coordinate and find mechanisms 
to assist in the revitalization of fragile and postconflict 
countries in a much more effective way.
    IDA is now taking a much greater role in supporting 
regional projects, which are important for many countries to 
address water management, road networks, trade facilitation, 
and energy assets.
    In conclusion, the fight against global poverty is one of 
the biggest challenges of our time. As both a courageous and 
generous Nation, the United States is a natural leader in this 
fight to support those in the greatest need. IDA is probably 
the most effective institution through which we can invest to 
achieve that goal. This is not to say IDA and the World Bank 
are perfect. Rather, it underscores the need to constantly 
reevaluate IDA's approach to find out what works and what 
doesn't.
    In the end, what we would ask for is the full funding of 
our request, which is something that IDA needs to help make 
those contributions and to help pay for that debt relief. The 
continued arrears by the United States jeopardizes our ability 
to deliver on our promises and hurts our influence to lead IDA.
    We respectfully urge your support. I look forward to 
answering any of your questions.
    [The prepared statement of Assistant Secretary Lowery can 
be found on page 60 of the appendix.]
    The Chairman. Mr. Secretary, we share, many of us, the 
Administration's view that support for these institutions is 
important, but you just heard a very strong argument that might 
have some appeal here from our colleague from California. What 
is your response to those who say, ``Well, but the World Bank 
is lending money to Iran, and therefore we should sever 
relations?'' What are we doing about that, and how do you 
respond to that?
    Mr. Lowery. Congressman Sherman's question, I know he is no 
longer here, but it is true that IDA and the IBRD are 
associated, but the IBRD is financed through putting bonds out 
in the market. IDA is financed through donor support.
    The World Bank, over the objections of the United States, 
strong objections, has provided finance in the past to Iran. 
The last time that was done was over 3 years ago.
    If you cut assistance to IDA, what you are cutting is 
assistance to Haiti, Liberia, Afghanistan, Ghana, and Uganda. 
You are not cutting assistance to Iran. So in that respect, I 
think it is a mistake to think that there is no distinction 
between IDA and the IBRD.
    Secondly, in terms of what is going on in Iran, we have 
been very critical of the World Bank providing any assistance 
to Iran. Most of the assistance was associated with the 
earthquake in Bam a few years ago, to help provide support to 
help with the problems that happened with that earthquake.
    We have nothing against the Iranian people; we have 
something against the Iranian Government. I would say I can't 
think of anybody who has done more to try to help stop 
financing to Iran than Secretary Paulson and Under Secretary 
Levey at the Treasury Department. So we stand very strongly 
with the Congressman from California on the goals of what he 
wants to achieve. We just don't think his methodology is 
correct.
    The Chairman. Two things. This is a financing separation, 
but let's talk about what is going forward. Is there anything 
pending from the World Bank? Part of the problem with Iran is 
not simply that we have very legitimate concerns with the 
irresponsibility of the government and its continued insistence 
on getting nuclear weapons. It would be an inconsistency 
between tough economic sanctions and this. But it would come as 
a surprise to people who think of the Bank as trying to help 
poor countries. Iran must be edging up into the category of 
countries that even the middle-income countries aren't there.
    Are there any pending proposals to provide aid to Iran? I 
assume we would strongly oppose them. We have this alliance 
with several of our allies. We don't ourselves have the votes 
solely to block it, but I would think if you got the countries 
that have been working with us on sanctions, the Western 
Europeans and others, we ought to have the votes to say no to 
it.
    Mr. Lowery. That is a good question. The World Bank, as I 
said, has not provided any assistance to Iran for over 3 years 
in terms of making new commitments. My understanding is that 
there is no plans or pipeline coming up to provide new 
assistance to Iran. I believe that there are disbursements from 
old loans that are still going out, and those are very 
difficult to stop once the decision has been made to let them 
go forward.
    As I said, we thought it was a mistake to let them go 
forward. I think we have been proven right, as we have now seen 
since those have gone forward, the U.N. has taken a number of 
sanctions on Iran. Just this week, we saw the European Union 
agreeing with the United States on taking financial sanctions 
against one of the financial institutions in Iran.
    But to my understanding, the World Bank--one thing we were 
questioning is whether the World Bank is actually living up to 
U.N. sanctions. The general counsel of the World Bank has given 
an opinion after discussing it with the U.N. general counsel 
that they are.
    I agree with you completely, we need to continue to stop 
this until the Government of Iran does change--
    The Chairman. I think it would be helpful, both as a matter 
of policy in general--and again, we are not talking about 
poverty there. If they can afford to do some of the things they 
are doing, I would think they don't need the World Bank's help. 
But I would tell you, I think a letter from the Secretary of 
the Treasury not only reaffirming our intention to vote against 
any new money for Iran, but reassuring us that this 
Administration is working in concert with various allies to get 
the votes to block it, which we ought to be able to do. I would 
think if our European allies and Japan and some others who have 
joined us in this were to join, we could block it.
    I also would hope that Mr. Zoellick would certainly not be 
supportive of this, and I don't think he would be, both, again, 
because of the economic necessity, etc. I understand it is a 
different story to be disbursing what is already there. If we 
can get those assurances, I think that would be very helpful
    Mr. Lowery. We can definitely look into that.
    The Chairman. The last thing I would add, I have here the 
``Doing Business'' report. They gave some awards. The head of 
Doing Business was--the Bank gave out its annual Doing Business 
Reformers' Club Awards. The best reformer was that noted 
paragon of human rights and equity, Egypt. Unfortunately, Saudi 
Arabia and China were only in the top 10.
    Now, a report which talks about how good Saudi Arabia and 
China are just can't be what we want to see. They won this 
award because--and I notice one of the things they say in here 
is that they worry that people get 1 day a week off, and some 
other things.
    This index is really a problem. Saudi Arabia and China are 
in the top 10; that can't be good. So I would hope you would 
join us in trying to deal with this. That is another threat to 
the level of continued support that we want.
    I would ask at this point to put into the hearing record--I 
am quoting from the letter from Peter Bakvis, the Director of 
the International Confederation of Free Trade Unions, his 
Washington office, to his labor colleagues; and an article from 
that radical publication, the Wall Street Journal, authored by 
Mr. Bob Davis. The headline is, ``Report on World Bank Sees 
Deregulation Bias.'' That is a report from the Bank's own 
internal investigator.
    I ask unanimous consent to put these in the record. Without 
objection, it is so ordered.
    The gentleman from Alabama is recognized.
    Mr. Bachus. I thank the chairman.
    It does appear that a lot of the resistance to this bill 
deals with channeling our efforts through the World Bank. One 
thing in this regard I think is important for us on this 
committee to keep in mind is that I think Bob Zoellick is 
providing wonderful leadership at the World Bank. He is very 
well respected, not only here in the United States, but I think 
throughout the globe. It is a difficult balancing act.
    But I will ask you that question, Assistant Secretary 
Lowery. Is it better for us to contribute to the World Bank or 
to give--is that the most effective way, or is it more 
effective to give through our own government programs?
    If we do give through our own government programs, do we 
sacrifice some of the marshalling and coordination where the 
World Bank convenes and will marshal assets, and really, in my 
mind sometimes, the total effect is greater than the parts?
    Mr. Lowery. I think you ask a very good question. I used to 
work for one of the bilateral development agencies, the 
Millennium Challenge Corporation. I think it is important to 
actually have a broad strategy on how you are doing 
development. There are things that USAID does that, frankly, 
they do better than anybody else in the world. There are things 
that MCC is doing--I don't think MCC has the track record to 
say they are doing it better than anybody else in the world, 
but they are doing something that I think is very different, 
and I am very hopeful about their future.
    Then there is the World Bank. The World Bank is doing 
things in a way in terms of leveraging others' resources and in 
terms of the way they focus on such issues as measuring results 
and actually providing assistance to the poorest countries on a 
performance-based allocation system and working with those 
countries that is very, very highly rated.
    I mentioned Bill Easterly in my testimony. But the United 
Kingdom, for instance, increased its resources to IDA by 50 
percent in this last replenishment mainly because they said we 
did our own rating of all the development agencies out there, 
and IDA was the best one that there is.
    So I think it is an effective institution, and obviously we 
think it should be supported.
    Mr. Bachus. Thank you.
    I would agree with you that they have expertise in certain 
areas that we simply don't have. I think by participating with 
others as partners, I believe that there is a lot of benefit 
and value in that, and because of Bob Zoellick, simply because 
he is president gives me much greater comfort.
    Mr. Assistant Secretary, is it correct that if we do not 
authorize the entire IDA package, that the United States 
actually forfeits $232 million prepaid credit toward our share 
of debt relief for the world's poorest countries, money we 
pledged but have not paid, and what would be the consequences 
if that happened?
    Mr. Lowery. If we do not authorize the 3-year increase and 
appropriate what we have done, there are a couple of things 
that will happen. One is the effect that you are talking about, 
which is that part of the IDA replenishment is to actually help 
fund the debt relief through IDA, so it is basically using the 
reflows and funding that.
    We had basically agreed with the world that we would try to 
do this on a dollar-for-dollar basis to continue to provide new 
assistance to poor countries, so IDA will be basically paying 
for the debt relief. Right now that is why, if you look at our 
arrears request, it was for $42 million for IDA. That was 
basically so we could make good on the debt relief part of our 
IDA request. We actually have a higher IDA number in arrears 
than that $42 million, but we wanted to get at what was vital 
to debt relief. So if we don't approve the whole thing, we 
could easily get into a situation where we are no longer 
financing the debt relief that we pushed so hard for.
    In addition, the reason why we are looking for a 3-year 
authorization is because IDA is trying to make sure that it has 
60 percent of its commitments to start putting out new money by 
December of this year. The authorization on a 3-year basis is 
about basically trying to get to that 60 percent number. The 
United States is obviously the second largest donor to IDA, so 
that is a good way at getting toward that 60 percent figure.
    Mr. Bachus. Thank you.
    The Chairman. The gentleman from California.
    Mr. Sherman. Thank you, Mr. Chairman, and thank you for 
joining with me and others in focusing on the Iran part of the 
World Bank's portfolio.
    About a year ago, the Secretary of the Treasury was here 
before us and he described in detail all the hard work he had 
done--calling finance ministers around the world, putting 
America's credibility on the line, hour after hour of hard work 
to try to save Mr. Wolfowitz's job. He also indicated that he 
hadn't spent a full 60 seconds of personal effort to prevent 
the World Bank from disbursing money to Iran.
    Are you aware of what the Secretary of the Treasury has 
personally done? How many hours of his time would you estimate 
he has put in; how many finance ministers has he personally 
called in an effort to halt all further disbursements to Iran?
    Mr. Lowery. I can say this: Under Secretary Paulson's 
leadership, not one new dime has been committed to Iran by the 
World Bank.
    Mr. Sherman. My question was--
    Mr. Lowery. You asked about his leadership, and that is his 
leadership.
    Mr. Sherman. I phrased the question very carefully; I said 
to prevent disbursements. By that, I think we clearly 
understand disbursements on the $1.3 billion of money in the 
pipeline already approved. So as to stopping disbursements, how 
many finance ministers has the Secretary personally called?
    Mr. Lowery. I don't have an answer to your question. I can 
say this, that the Secretary of the Treasury has worked hard to 
basically stop disbursements to Iran. He has worked, I know, 
and had discussions with not just finance ministers, but also 
with the president of the institution. He has asked us, and we 
have followed up on making sure that is Iran's disbursements by 
the World Bank in line with U.N. sanctions, to the point where 
the General Counsel's Office at the World Bank went and talked 
to the general counsel at the U.N. to make sure that they were 
within sanctions to continue the disbursements, and it turns 
out they are. It just turns out legally they are.
    I can also say that the Secretary of the Treasury has spent 
innumerable numbers of hours, and there is no way I can count 
it, on basically working on stopping finance to Iran. In fact, 
I would suggest that nobody you know has spent more hours than 
Secretary Paulson on that issue.
    Mr. Sherman. Sir, by changing the question, you were able 
to give me the answer that you wanted to give. Are you saying 
that the United States takes credit for the fact that of the 
$1.35 billion approved for disbursal during this 
Administration, only half has actually been disbursed? Are you 
saying that the United States takes credit for the fact that 
roughly $667 million has not been disbursed yet?
    Mr. Lowery. I don't take credit for any of it because we 
voted against those commitments. We think it was outrageous 
that the World Bank made those loans. We tried to prevent them. 
We were unsuccessful. That doesn't mean we didn't work hard at 
it.
    Mr. Sherman. We have had testimony before this committee 
that indicates that you did very little except vote ``no,'' 
and, of course, you are required to do that by law.
    But you are missing my question. My question is not 
preventing approval of the loan, it is taking the extraordinary 
action of blocking disbursements after the loan has been 
approved. Some $667 million has not actually been disbursed, 
even though it has been approved. Does the Administration take 
credit for the fact that there seems to be a slowness in the 
checks being cut?
    Mr. Lowery. I don't think I would want to take credit for 
that. I think that basically we have worked hard to prevent any 
new funding from going to Iran. We have been successful at 
that. We are working hard--we would like to stop the 
disbursements, but we are right now not in a position that we 
can block those disbursements. We do work with our partners on 
those issues, but I don't want to take credit for that.
    Mr. Sherman. World Bank practice is not to approve loans 
unless there is a country assistance strategy in force. There 
was no country assistance strategy for the two projects 
approved in 2005, and yet they were approved anyway. So the 
World Bank has violated its own practices in order to approve 
loans to Iran.
    What assurance do you have that a new country assistance 
strategy will not be approved by the World Bank? If they 
approved one tomorrow, would that be in violation of any 
promises that have been made to us either by World Bank 
executives or by the board members in the countries they 
represent?
    Mr. Lowery. My understanding is that the World Bank does 
not have any new loans in their pipeline for Iran. They do not 
have a country assistance strategy that is being prepared for 
Iran, and we obviously would be working against that. We would 
work with our European and Japanese allies on such a issue. My 
guess is, given the way the sanctions have been done over the 
last few years, that some of their positions on World Bank 
financing for Iran will have changed over that time.
    Mr. Sherman. So we have fond hopes, but no promises. Have 
we indicated that our policy toward any other country on any 
issue would be affected? In effect, have we used linkage to 
indicate to our European and Japanese friends that approval of 
additional loans to Iran or disbursements of loans in the 
pipeline may adversely affect our opinion of some issue of 
importance to them?
    Mr. Lowery. I don't know of anything.
    The Chairman. Will the gentleman yield?
    It is a central question. My staff, who does an excellent 
job of keeping up with this, tells me the reason the general 
counsel of the U.N. was able to tell the general counsel of the 
World Bank that this did not violate sanctions is that there 
was an explicit loophole or an explicit exception for Iran 
getting--for the World Bank and the sanctions resolution. If 
that is the case, one of the things that would be helpful is, 
as it does appear to be a toughening on the part of some of our 
allies, to try and get a new resolution that rescinded that 
permission, because apparently it is not a surprise that there 
is language in the resolution that went through the Security 
Council. Maybe that was the best deal we could get at the time. 
But if there is going to be new Security Council resolutions, 
rescinding that exception would seem like one way. Then you 
would have a much stronger argument on the disbursements.
    Mr. Lowery. The exception is for humanitarian and 
development assistance purposes, which is not just the World 
Bank, I am sure. But it is an exception we actually have tried 
to close in various U.N. negotiations. We have not been 
successful at that.
    Mr. Sherman. Just reclaiming my time for a second, the 
reason our U.N. sanctions have such loopholes, including this 
one, and the reason the loopholes aren't closed is our 
unwillingness to use linkage, our unwillingness to tell Russia 
or China that how they voted at the United Nations will have 
any effect on what we do on issues important to them, whether 
currency valuations or anything else. Likewise, the Under 
Secretary has indicated that our European and Japanese friends 
have never been told that how we react to any issue of concern 
that comes within Treasury's jurisdiction will be affected by 
their actions with regard to Iran. So in the absence of any 
ability to bargain, it is not surprising our diplomats have--
    Mr. Lowery. I will also say that it is the efforts of the 
Treasury Department that have been able to actually get just 
this week the European Union to actually put sanctions down on 
something like Bank Melli, which was a large effort on our 
part, and now successful effort, in terms of the European Union 
to have the same type of sanctions we already have, and that is 
an effort, frankly, of the Treasury Department as well as the 
State Department.
    The Chairman. I would also remind you that this House 
passed a bill that originated in this committee, the Iran 
Sanctions Act--and the gentleman from California was a major 
sponsor--that would remove any obstacles from corporations or 
State governments from divesting, and that has been bottled up 
in the Senate. It would be helpful if there was some action 
there.
    The other thing, as you say, we talk about the inspection 
panel. Fifteen years ago, this committee did the inspection 
panel. Sidney Key was then our staff director and played a 
major role. The way it was done, we had no authority to order 
the World Bank to do an inspection panel. They had no ability 
to order to provide them the money. What we did was to act on 
the principle that the gentleman from California is basically 
invoking, the ankle bone is connected to the shoulder bone 
ultimately. So we would advise some attention to that.
    The gentleman from Georgia.
    Mr. Scott. Thank you very much, Mr. Chairman.
    Mr. Lowery, let me just bring your attention to another 
area. Let me find out what you are all doing, what is IDA doing 
with Haiti, and what are you doing with Africa, because there 
are many things that the human body can do without, and none of 
them are either food or water.
    It just breaks my heart as I watch the television screens 
and read in the newspapers of the devastation of hunger and 
people going without food in Haiti, which is right off our 
shores. I want to know what IDA is doing to help with that 
situation.
    Secondly, I want to know, now we have a problem with water 
on the Continent of Africa, especially in the area of Rwanda. I 
want to know what the IDA is doing to help with water scarcity 
in that area. I do understand you are moving in some directions 
with the program in Rwanda, but I think that all of us on this 
committee, and the American people, certainly would like to 
know. These are two very pressing humanitarian issues of the 
maximum degree, food and water.
    In Haiti and Africa, what are we doing about it, what is 
IDA doing about it, how much money are you spending on it, and 
can you give us a complete understanding of the gravity of the 
situation and where you are placing that on your agenda?
    Mr. Lowery. Thank you. You asked a couple of questions in 
there. Let me try to see what I can do.
    In Haiti and in Africa, the United States has been leading 
the way, although IDA has been doing a lot of work, on 
providing a significant amount of debt relief to those 
countries. Haiti is basically--this one, I would say, has been 
a big U.S. effort--going to get over $1 billion in debt relief 
from the IMF, the World Bank, and the Inter-American 
Development Bank. There is no way that would have ever happened 
without the United States. It would never have happened.
    Secondly, the African countries, most African countries, 
are getting a huge amount of debt relief. I just had it next to 
me. Rwanda is going to get $1.8 billion of debt relief from the 
IMF, the World Bank, and the African Development Bank, as well 
as debt relief from its bilateral creditors.
    Mr. Scott. Can you explain to me, I am just a country boy 
from Georgia here, tell me how directly debt relief will be 
able to put food directly in the stomachs of the people in 
Haiti and get water to the people in Africa.
    Mr. Lowery. Basically, the idea is that what debt relief 
does is take the stock of debt and basically reduces i. That 
means that the flows from debt do not have to be paid any more. 
So because of that, you actually have savings from that.
    Now, the idea is that they use the savings to do things 
like put more money towards education or health care or water 
systems or towards agricultural production, which is important 
for food. On top of that, going beyond debt relief, the World 
Bank provides obviously a lot of new assistance to countries 
like Haiti, Rwanda, and so forth through IDA. And that is what 
this whole allocation system, that is what I am here doing 
today. In Haiti, for instance, the World Bank was going to 
provide $80 million in the first half of this year alone to 
Haiti as a grant. But because of what has been going on with 
food prices and food inflation, they are putting another $10 
million on the table basically as emergency food support for 
the people of Haiti. So these are the type of things they have 
been doing.
    In fact, President Zoellick--I know the ranking member had 
mentioned his leadership in a number of areas--I would say his 
biggest area that he has been a leader on is this agricultural 
problem. How do we get short-term assistance to countries like 
Haiti and other countries? And he has basically led an effort 
to get about $1 billion around the world to countries. On top 
of that, how do we address the medium-term and longer-term 
agricultural productivity issues so we don't get back into 
these problems?
    Mr. Scott. Mr. Lowery, is there a way that IDA can help put 
pressure on getting food now into Haiti? Is there any role that 
you can play that--the people are hungry right now.
    Mr. Lowery. Yes.
    Mr. Scott. The people are starving right now. This is an 
urgent matter that is not going to wait on a crop to grow. So 
what can you do, what can your agency do to help put pressure, 
and where would that pressure be to get food there now?
    Mr. Lowery. That is an example of what the World Bank is 
doing. They are providing short-term assistance. When I say 
short-term assistance, that is about providing food now. And 
that is--sometimes it is done through the World Food Programme, 
which is a U.N. organization. Sometimes it is done through 
bilateral organizations. IDA is already putting on the table an 
emergency $200 million, of which $10 million is going to Haiti 
to actually put food down there now.
    Mr. Scott. All right. Good.
    Now, please, Mr. Chairman, just one little question I have. 
I know my time is running out. But on the water--
    Mr. Lowery. Yes.
    Mr. Scott. --are there specific programs--why is this? This 
is a phenomena to me. I am just finding out about this today as 
a matter of fact, that they have a water problem there; people 
going without water. And you are involved in that. Can you give 
a quick summary of what you are doing there? And are you moving 
ahead with what we call harvesting water for the future?
    Mr. Lowery. No, I think that--I mean, the World Bank's 
efforts on issues like water are going to be about the future 
most of the time, because it is--what they are doing is they 
are not a humanitarian organization. So if there are 
humanitarian needs, usually it is not the World Bank. It is 
things like the United Nations; or USAID is, I think, the best 
humanitarian organization in the world probably; or NGOs and so 
forth.
    What the World Bank will have the best expertise on is 
providing support, financial support, technical support on 
developing better water systems, and so increasing water so 
that you can get water for the future, such as, you know, there 
are different ways of building systems. I think that is where 
the World Bank has the expertise.
    I don't know the specifics in terms of Rwanda in terms of 
how much financial assistance they are providing. We can get 
that for you. But that is where the World Bank usually focuses 
its attention.
    Mr. Scott. Okay.
    Thank you very much, Mr. Chairman.
    If you could get me a report to my office on what 
specifically you are doing for the immediate situation and 
crisis in Haiti, and what you are doing for the immediate 
situation with the water crisis in Rwanda, I would deeply 
appreciate it.
    Mr. Lowery. Yes, sir.
    Mr. Scott. Thank you, Mr. Chairman, for your indulgence.
    Mr. Bachus. Mr. Chairman?
    The Chairman. Yes, the gentleman from Alabama.
    Mr. Bachus. If I could take maybe 1 minute to address what 
the gentleman from Georgia was referring to. I think it would 
also be helpful--one thing I don't want the committee to miss 
is what the Assistant Secretary said about Bob Zoellick's 
leadership in, not only addressing the short-term needs, which 
are going to continue to be needs if you don't increase the 
domestic productivity in agriculture. And so the report could 
also include the efforts of the World Bank and the IDA to 
promote policies which lead to greater agricultural production 
in a lot of these countries, and long term, these countries 
feeding their own people is really, that is the very best 
solution. I think that is one of the things that leads to the 
best successes.
    Now, we also have another situation, and that is not for 
this hearing, but it is the effect of ethanol on the world food 
prices. And that is--I won't get into that.
    Mr. Scott. [presiding] The gentleman from Texas, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Lowery, as you know, I opened up with a Haiti question, 
so please don't feel as though we are picking on you as it 
relates to Haiti.
    But it is something that really does touch our hearts and 
our souls and shocks our consciences because I have actually 
been there, and I have seen the circumstances of which others 
read about. And it really is deplorable and in need of some 
immediate attention.
    You indicated that we have provided about $1 billion in 
debt relief. What is the total amount of debt owed, please, 
from Haiti?
    Mr. Lowery. I don't have that figure in front of me, but I 
can try to get it. I don't have that figure. I know that it is 
about $1.1 billion of debt relief. My guess is that is almost--
I think that should be related to basically 100 percent of the 
debt from bilateral official creditors and the multilateral 
official creditors. There is probably some small change left 
after that. Haiti is still going through this debt relief 
program. It should conclude that program by early next year.
    Mr. Green. I am concerned about the debt relief, because 
you have explained that, in essence, what happens is this: When 
you have debt relief, you can then take your funds and 
rechannel them to other things that are more urgent.
    Mr. Lowery. Yes.
    Mr. Green. Why is it, in a country wherein you have about 
70 percent of the population living off of $2 a day or less, 
more than 50 percent living off of $1 per day, 80 percent 
poverty, the highest HIV/AIDS rate in the Western Hemisphere; 
they have a hunger season; why can we not give them total debt 
relief given that we can see that the debt is a part of the 
problem? There is no escaping the fact that the debt is a part 
of the problem. Why can we not give them total debt relief?
    Mr. Lowery. We are giving them total debt relief.
    Mr. Green. But we are--excuse me, just a minute, and I 
don't mean to be rude, crude, and unrefined, but I have little 
time. ``We are giving'' is not quite the same as ``We have 
given.''
    Mr. Lowery. Right.
    Mr. Green. And I want to get to the ``We have given'' point 
in the conversation.
    Mr. Lowery. Yes.
    Mr. Green. When can we have total debt relief for Haiti?
    Mr. Lowery. It is expected that total debt relief for Haiti 
will be finished and completed by early next year.
    Mr. Green. I take early next year to mean some time in the 
month of January. That would be my definition. If my 
definition--
    Mr. Lowery. I am hoping it will be earlier than that.
    Mr. Green. --is incorrect, I would gladly want to hear 
yours.
    Mr. Lowery. No, no, right now the best expectations, 
basically the way the debt relief initiative has been set up a 
long time ago for all countries, Haiti and lots of other 
countries, is you start receiving debt relief on what is called 
an interim basis. That means on a flow basis, and then so you 
start getting the debt relief on the flow basis. The stock, 
where you do the 100 percent debt relief, that happens once you 
have completed kind of a program. The program is associated 
with some of the type of criteria that was in the Jubilee bill 
this year.
    Mr. Green. Yes, because I have limited time I will look 
forward to hearing more from you about the debt relief. And 
maybe you and I can remain in contact with each other such that 
we can--
    Mr. Lowery. I would be happy to talk to you or your staff 
at any time.
    Mr. Green. --get more intelligence on this as it 
progresses.
    Next point, sir, sometimes shining a light on a problem 
will cause more attention and more help to manifest itself. 
Have we done any trips to Haiti at the level of the Secretary, 
wherein someone actually goes there and you actually take the 
world there through the lens of the camera so that people can 
see what I have seen and perhaps have a much more sympathetic 
response?
    Mr. Lowery. Yes. Well, Secretary Paulson has not gone to 
Haiti. I know that he has met--
    Mr. Green. Have you gone, by any chance?
    Mr. Lowery. I have, but it was in a previous job. I have 
been to Haiti.
    Mr. Green. You know about the food riots?
    Mr. Lowery. Yes. In fact, actually, I met with the prime 
minister who gave up his seat literally 2 weeks before the food 
riots, where he basically said, ``I need to step down.''
    Mr. Green. Can we look at a trip to Haiti, someone, so that 
we can show the world what is happening right here in the 
Western Hemisphere?
    Mr. Lowery. Right. I think that actually--I know that 
Assistant Secretary Shannon from the State Department, and I 
know that other high-level officials from our State Department 
and our AID have been to Haiti. At the Treasury Department, we 
only have a few people who travel. And so it is--there are many 
things. But let me look into it.
    Mr. Green. I really believe someone needs to make a trip to 
Haiti a priority so that we can bring the world's eye in by the 
way of the lens of a camera.
    Let me just share this with you. Here we have this some 9 
million people as I understand it. They are on an island. If 
they leave and they come to the United States, we immediately 
send them back. They don't have the benefit of wet foot/dry 
foot. Doesn't matter if they are completely dry and they get 
there and they have a job, they are still going to be sent 
back. So they are locked into this land mass with the highest 
HIV/AIDS rate in the Western Hemisphere, a high infant 
mortality rate, living off of $1 to $2 per day, drugs now 
coming through there because it is a staging point to get drugs 
to the United States of America. This is a human tragedy of the 
highest proportion, and it is right off the coast of Florida. 
We really have to do more. And I beg that you would be a part 
of that avant garde to make that change that is necessary. 
Thank you.
    Mr. Lowery. I can say I do know that our Agency for 
International Development has stepped up its efforts and is 
putting another $45 million on the table to do what you were 
just saying to help the people of Haiti. So, we are doing 
things in the Administration; it just might not necessarily 
always be at the Treasury Department.
    Mr. Green. Thank you very much, sir.
    I yield back.
    Mr. Lowery. You are welcome.
    Mr. Scott. Thank you very much, Mr. Green.
    Mr. Cleaver from Missouri is recognized for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Mr. Lowery, I apologize. I am shuttling--you know how this 
system works--between two committee hearings, and I desperately 
wanted to be here.
    I wanted to follow up on my colleague's questions. And I am 
wondering if there is any pushback from Treasury on World Bank 
conditionality in terms of greater transparency so that 
parliamentarians, people around the world can actually have--
can actually look at the conditionality issues and participate 
in decisions at the World Bank.
    Mr. Lowery. I think that in the United States, we actually 
have been probably the leading advocate for pushing for as much 
transparency as possible from the World Bank, including putting 
loan documents, which is where you get into conditionality and 
covenants and so forth, on the Web site.
    So, yes, we are a big supporter of that.
    Mr. Cleaver. What is the likelihood that greater 
transparency will in fact occur? I mean, if the United States 
is supportive, what else is needed? Is there something that 
we--
    Mr. Lowery. I think the World Bank actually has become more 
and more transparent over the last I would say probably 10 
years and puts a number of documents on its Web site. In fact, 
if anything, the one problem sometimes is the Web site is just 
filled with documents.
    But I think in terms of conditionality, what the World Bank 
has done is it has done a study, it has brought in independent 
advisors to talk to it about its conditionality. It goes to 
Chairman Frank's questions earlier or points earlier about how 
there is probably too much conditionality. How do you 
streamline it? How do you make it more targeted so it is 
specific about getting the outcomes that you want out of 
particular programs? And we are a big supporter of as much 
transparency as possible.
    I think you have a witness on the next panel whom I believe 
has had fairly significant access to World Bank files on the 
types of conditionality they have.
    Mr. Cleaver. Is the World Bank conditionality database 
available on the Web site?
    Mr. Lowery. I am hearing both ``yes'' and ``no'' behind me. 
I don't know the answer myself. Why don't we get you an answer 
in writing on that one, sir?
    Mr. Cleaver. Okay. Who is going to do it?
    Mr. Lowery. We at the Treasury Department will take care of 
that.
    Mr. Cleaver. All right.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    The Chairman. Thank you.
    The gentlewoman from Wisconsin, who has been one of the 
members with the greatest interest in the IFIs, and especially 
with regard to Africa, but not exclusively.
    The gentlewoman from Wisconsin.
    Ms. Moore of Wisconsin. Thank you so much, Mr. Chairman.
    I have listened very intently to your testimony, Mr. 
Lowery. I was particularly interested in a comment that you 
made in your written testimony about the complex international 
aid architecture. I think I will steal that for future 
rhetoric. I think it is very, very telling.
    Just sort of piggybacking on questions that others of my 
colleagues have already asked, I just want to laud the Treasury 
Department; I want to laud the World Bank and the IDA for its 
increased transparency that you have mentioned over the last 10 
years.
    And it is only because of this transparency that we know so 
much about how conditionality sometimes undermines the very 
admirable goals of eliminating or reducing poverty. We have 
already talked about conditionality. Bad habits are hard to 
break, as we all know. And so, even though we have called for 
reducing some of the conditionality, there are still tremendous 
calls for governments to issue presidential or executive orders 
which undermine legislative oversight, call for labor market 
flexibility that undermines worker protections and violates the 
spirit of international laws. And we have seen poverty, quite 
frankly, rise.
    Can you tell me, can you describe for me how the IDA works 
within this complex international aid architecture with the 
International Finance Corporation, with whom you have a 
relationship, and the WTO, and maybe the Organization for 
Economic Cooperation and Development, other sort of trade laws 
that in fact maybe could spawn this continued conditionality? 
And I can give examples, but go on.
    Mr. Lowery. Well, IDA is usually one of the largest, if not 
the largest, donor in almost every country because of the size 
of it. And you can leverage resources from around the world.
    IDA actually focuses on development. I mean, that is what 
they do. And they focus on--they have people who are experts on 
specific functional issues, like how do you get better 
agriculture productivity? How do you build a road? How do you 
basically educate kids in a better way? And they obviously have 
people who are country experts.
    They work very closely with the bilateral aid community. 
And the couple of organizations you mentioned, the WTO is 
obviously about trade negotiations and trade type of issues. 
The OECD is mainly like sort of a think tank for developed 
countries in terms of economics around the world; although 
there is a coordinating mechanism under the OECD that actually 
tries to help coordinate among some bilateral donors on the 
aggregated basis as opposed to the country-specific basis. The 
World Bank is much more about the country-specific type of 
coordination.
    In terms of how that relates to conditionality, I think the 
World Bank has basically tried over--through a number of 
analyses that it has done internally and externally, has 
basically taken their criteria for conditionality and tried to 
streamline it over time. And in some respects, I think they 
have been pretty successful, and tried to make it much more 
focused, much more targeted on what it is you are trying to 
achieve in that particular loan or that particular program.
    That doesn't say they are perfect. It means they are making 
progress.
    Ms. Moore of Wisconsin. Let me stop--for example, let me 
give you another example, Afghanistan currently. We are sort of 
forcing a lot of privatization of public institutions. We have 
talked a lot here today about water and so on. We have seen in 
recent times a great deal of inequality and lack of services, 
really no payback to many countries, and yet we continue to do 
that.
    In terms of streamlining these conditionalities, all you do 
is put two or three conditions within one condition, and then 
you can say, ``We only have 27 conditions,'' but actually the 
average is about 72 conditions.
    So right now, in Afghanistan, we are forcing them to 
privatize. And that continues to be two of the main thrusts of 
conditionality, privatizing. We have seen it contribute 
extensively to poverty. This is one of the conditions that 
doesn't seem to be able to be extracted from these agreements. 
Can you tell us, as we look at replenishing the IDA fund, can 
you give us a defense of privatizing?
    Mr. Lowery. I am not sure I agree with your analysis.
    First of all, I am not sure there are 72 conditions. In 
fact, I would say there are probably more like 13 that IDA 
tries to do.
    There are sometimes benchmarks within those. And by the 
way, I am a big supporter. You need to have benchmarks. How are 
you doing on your program? What is actually happening here? Is 
this program working?
    In terms of conditionality, in terms of privatization in 
Afghanistan, Afghanistan will not succeed unless it has a 
private sector that is actually thriving so you can get greater 
economic growth and reduce poverty.
    That said, to my knowledge, the World Bank has not 
conditioned any programs in Afghanistan on privatization. But 
that doesn't mean that it is not a good thing. Sometimes 
privatization is a good thing. Sometimes it is not the 
appropriate thing.
    Ms. Moore of Wisconsin. Sometimes it is, and sometimes it 
isn't. But the parliamentarians have to decide that.
    Mr. Lowery. Parliamentarians, I mean, it depends on your 
system. I don't know the governmental system. I have just been 
to Afghanistan, and there are private sector institutions that 
are starting to pop up, and they are starting to do well. And I 
think that we should, as a country, and the World Bank should 
try to help create the conditions so that you can have a 
private sector that actually does thrive in Afghanistan. If 
that doesn't happen, then Afghanistan will never grow its way 
out of the problems that it has.
    Ms. Moore of Wisconsin. My time has expired too soon.
    The Chairman. The gentleman from Indiana.
    The gentleman has no questions.
    Mr. Lowery, I thank you. The staff of the committee, I 
think bipartisan, will be available to work with you on a 
couple of the issues. The Iranian one is obviously an important 
one, but conditionality, as you can see, is also. We would like 
to be able to work with you to a common end here. And I thank 
you for your testimony.
    Mr. Lowery. Thank you very much.
    The Chairman. We will have the next panel.
    Mr. Cleaver. Mr. Chairman? As he is leaving--
    The Chairman. Mr. Lowery, can you hang for one second for 
Mr. Cleaver?
    Mr. Cleaver. No, you don't need to answer. There are 37 
conditions. You said 13. There are 37.
    Mr. Lowery. In what?
    Mr. Cleaver. Per loan, average conditionality.
    Mr. Lowery. I am not sure I agree with that, but why don't 
I work on it and get a letter to your office.
    Mr. Bachus. Mr. Chairman, Assistant Secretary Lowery, one 
thing, I will just say this, one thing the Assistant Secretary 
said was that much of the aid that went to Iran is for the 
earthquake.
    The Chairman. Yes.
    Mr. Bachus. It would be helpful to--
    The Chairman. Mr. Secretary?
    Mr. Bachus. --have those figures.
    The Chairman. Probably, if you would leave, we could get 
started. You will never get out of here otherwise.
    And obviously, the hearing record remains open, and there 
can be some further conversations and we will preserve them for 
the record.
    The next panel is four people from various organizations 
that have been very much involved here.
    We will begin with David Beckmann, who is president of 
Bread for the World and Bread for the World Institute.
    Mr. Beckmann.

  STATEMENT OF DAVID BECKMANN, PRESIDENT, BREAD FOR THE WORLD 
                           INSTITUTE

    Mr. Beckmann. Chairman Frank, Ranking Member Bachus, and 
members of the committee, I really do think this committee has 
done a great job over a period of years making the World Bank 
and the other MDBs into better institutions. They are better 
institutions, and this committee has led the way. So I applaud 
you.
    And I thought the questions today, especially the questions 
about what is going on in Haiti and Rwanda, the sense that 
something really bad is going on, again the committee, I think, 
is ahead of the curve.
    I want to start by talking about the hunger crisis that we 
are going through right now, because I think it changes the 
context for the work of the World Bank and the African 
Development Fund, and then talk a little bit about the World 
Bank and the African Development Fund and my recommendations 
for the committee.
    I think that the great majority of the poorest billion 
people in the world have suffered a serious reduction in their 
miserable living standards over the last year or so. I don't 
think it has dawned on most of us yet how severe a setback the 
world has suffered in its work to overcome poverty. It is 
mainly because of high food prices because very poor people 
spend almost all their money on rice or wheat or corn, and all 
those prices have gone up by roughly 100 percent over the last 
year. But it is also high fuel prices and other malfunctions in 
the economy, that mean that a lot of the poorest people in the 
world are down to one meal; they are pulling their kids out of 
school; they have sold the goat. And their governments, the 
poor country governments that import food and fuel are going 
broke in a hurry. My guess is that food-importing low-income 
countries are spending $70 billion more on food this year than 
they did 2 years ago.
    Now, in this context, the World Bank has done a remarkably 
good job. The whole world, I think, has been a little slow off 
the mark. But the World Bank has been a leading agent in 
catching on to what was going on, responding in a quick way, 
and leading the world in a very sophisticated way in figuring 
out how to respond. They have set up--they are increasing their 
lending, their credits for agriculture.
    But the most impressive thing is that they have set up a 
rapid response facility which will fund emergency humanitarian 
activities, but also fertilizer and seeds. This is a case in 
which they are not being ideological about prices. They are 
helping these governments subsidize fertilizer and seeds for 
poor farmers because the farmers can't afford fertilizers at 
today's prices. They would like to respond to high prices for 
food, but they need fertilizer and seed.
    I think the Bank's quick response in this situation 
illustrates some of the strengths of the MDBs, their analytical 
capacity. In the case of the African Development Bank, the 
analytical capacity is not as formidable as the World Bank, but 
its African capacity. They are focused on poverty more than 
most institutions, certainly more than the Agency for 
International Development. Partly because of congressional 
mandates, the Agency for International Development does a lot 
of other things besides poverty reduction. So if you look at 
where the money goes, the money that you authorize for IDA and 
the African Development Fund goes to poor countries. The money 
that Congress gives to AID mostly doesn't go to poor countries.
    Third, I think the MDBs have pretty good partnership 
relationships with the recipient governments and much more than 
in the past with civil society.
    And finally, I just want to give the World Bank credit for 
its system of self-evaluation and its, compared to the past, 
just dramatically more open attitude toward diverse opinions 
and criticism of the Bank.
    So my recommendation to the committee at this point, you 
know, Bread for the World has been critical of the Bank over 
the years, but my recommendation to the committee at this point 
is that you authorize these replenishments, that you give them 
clean 3-year authorizations. I think the banks have earned a 
vote of confidence, partly because of your past work. I think 
the United States will be a stronger leader in these 
institutions if the United States comes across as a team 
player.
    Also, this world hunger crisis is going to require a 
significant financial response. And authorization of the 
replenishments is one thing that you can help with.
    [The prepared statement of Mr. Beckmann can be found on 
page 49 of the appendix.]
    The Chairman. Next, we have Nuria Molina-Gallart, who is a 
policy and advocacy officer at the European Network on Debt and 
Development.
    Ms. Molina-Gallart.

STATEMENT OF NURIA MOLINA-GALLART, POLICY AND ADVOCACY OFFICER, 
            EUROPEAN NETWORK ON DEBT AND DEVELOPMENT

    Ms. Molina-Gallart. Thanks very much, Mr. Chairman and 
members of the committee, for inviting us to share our views on 
World Bank conditionality today.
    Conditionality is still a heavy burden on developing 
countries, as we have heard today. It makes it unpredictable. 
It undermines--
    The Chairman. Why don't you pull the microphone closer, 
because as you drop your head, you lose it. So pull the 
microphone very close, up closer that way. Yes.
    Ms. Molina-Gallart. I guess I am too short.
    The Chairman. No, it is when you read, and you move your 
head.
    Ms. Molina-Gallart. Yes. It makes aid unpredictable, as I 
was saying. It undermines domestic accountability, as it has 
been said today, as well. The World Bank has acknowledged that 
it hasn't been efficient in leading the reforms that they were 
intended for, and it is very questionable that it has 
contributed to poverty reduction.
    Because of all these criticisms, criticisms from NGOs but 
also from the British Government, in 2005, the World Bank 
adopted the Good Practice Principles on conditionality to 
govern the way they apply conditionality, mainly intended to 
streamline conditionality, reinforce country ownership and 
mutual accountability, and customize conditions to the 
country's circumstances.
    What has happened since? Well, two reports from the World 
Bank have been published, in 2006 and 2007, but they paint an 
overly optimistic picture. And here I come to the issue on 
numbers that was very recently being discussed. Is it 37, or is 
it 13 or 12, like the representative from Treasury was saying? 
Well, according to a Eurodad report published in November 2007, 
precisely to provide an alternative and more independent view 
to the World Bank reports, conditions have only dropped from 46 
before the implementation of the good practice principles to--2 
years after the approval of the good practice principles, they 
have only dropped to 37. And here basically we count, we 
include the benchmarks that the representative of the Treasury 
has mentioned basically because benchmarks are future 
conditions in future loans, and because developing countries, 
according to a survey conducted by the World Bank in 2005, 
perceived these benchmarks as if they were binding conditions. 
So they have the same impact.
    But these numbers could be higher, because actually the 
Bank usually uses what they call umbrella conditions. It 
bundles different policy actions into a single condition. And 
if these are unbundled, actually numbers could increase around 
12 percent. Basically, if this committee recommends Treasury to 
advise that IDA should have an independent monitoring system on 
conditionality, should systematically assess the impacts of 
reforms, and improve implementation of Good Practice 
Principles, you will agree with me that this is three 
conditions. This is not one. And this is the way the World Bank 
sometimes bundles conditions.
    Seventy-one percent of all grants and loans, according to 
the Eurodad study, still contain some sort of sensitive policy 
reforms, such as price liberalization, privatization, commodity 
price regulation, or trade reform or tariff reductions, and 12 
out of the 16 countries assessed face privatization-related 
conditions.
    I agree here with the representative of the Treasury that 
privatization and liberalization are not bad, per se. Sometimes 
it is the right policy needed. But I agree as well with 
Representative Moore that this is a decision that needs to be 
taken by national governments in dialogue with national 
constituencies and parliaments and not by outside actors.
    It is also important that regulatory frameworks are in 
place, and these are not rushed processes. And mostly, it is 
very important that the impact of the reforms on the poor is 
carefully assessed.
    The World Bank has committed to do these sort of 
assessments of the impact of the reforms they are putting as 
condition on the poor. But, actually, for instance, in the case 
of Mali, these assessments showed that the privatization 
condition of the Bank on the cotton sector could increase 
poverty in 4.6 percent. What happened? Well, the report was not 
made public.
    Even worse, in Afghanistan, as it has been also said, the 
World Bank has backed, in 2007, a policy to privatize more than 
50 state-owned enterprises. This is very problematic in a 
fragile state such as Afghanistan.
    And also more striking is privatization, as we have heard, 
in essential services, provision of essential services, such as 
water or health. This is also happening in 2007 in Sierra Leone 
or in the case of the health sector in Afghanistan.
    The Bank claims that these are conditions which are owned 
by these countries. But recently a partner that we work with in 
Uganda said, yes, it is true the Bank has put the governments 
in the driver's seat, but the Bank, the passenger, still writes 
the map. So basically the concept of ownership needs to be 
carefully reassessed. And not only conditionality, but also the 
Bank gives advice and technical assistance.
    To wrap up, I would like to recommend to this committee to 
apply pressure, as it has done in previous occasions, to set up 
targets to streamline and reduce the number of conditions until 
conditions are completely phased out, to increase transparency 
and participation of parliamentarians and also the Bank focus 
on development outcomes, and most importantly, to 
systematically assess the impact of the reforms they put as 
conditions on the poor.
    It is also most important that an independent monitoring 
system be set up, because the fact that the Bank monitors its 
own progress is obviously, clearly problematic.
    Last but not least, I would also support the suggestion of 
Mr. Cleaver to publicize the World Bank database on 
conditionality, which, no, indeed, it is not accessible on the 
Web site.
    Thank you.
    [The prepared statement of Ms. Molina-Gallart can be found 
on page 65 of the appendix.]
    The Chairman. Thank you.
    Next, Mr. Edward Bell, who is senior program advisor at 
International Alert.

STATEMENT OF EDWARD BELL, SENIOR PROGRAM ADVISOR, INTERNATIONAL 
                             ALERT

    Mr. Bell. Thank you very much. It is a great honor to be 
here, and thank you for the opportunity to speak to you.
    I have spent the last 18 months doing research in the field 
and from London on the World Bank decisionmaking in fragile and 
conflict-affected countries. And what I would like to do in the 
5 minutes that I have is try to shift the emphasis a little 
here onto political analysis, the actual governance context in 
which the World Bank is making very difficult decisions.
    So just in three parts then: First, I would like to talk 
about the role of the World Bank in these places; second, the 
institutional blockages to more effective action; and third, 
some suggestions on ways forward that I hope the committee will 
support.
    So, first, there are still some very influential people who 
think that the World Bank should not be involved in fragile 
contexts. It is too political. It is too difficult, and 
security situations often make Bank behavior or Bank activities 
very difficult.
    I think this is wrong headed. I think that due to the dire 
realities of poverty in these situations and the global and 
regional spillovers from them, I think it is essential for the 
World Bank to continue to engage and deepen their engagement in 
these countries.
    Second, I think it is important, as specific teams and the 
Bank have recognized, that all economic development and social 
sector activities impact on fragility and the peace-building 
context in these very difficult, unstable countries.
    So the question is, how does the Bank behave better to turn 
around that state and societal fragility? There are three 
institutional blockages to this, I think, and they are 
interrelated. The first relates to the Bank's organizational 
culture. This is changing, but I think the World Bank needs to 
do more to deepen its understanding of political contexts, 
because if you don't understand the conflict dynamics in these 
40 to 50 countries in the world, then I think the activities 
will be simply wrong. And I think maybe we will come back to it 
in the question and answer period, but this has major 
implications on conditionality. The point about conditionality 
is how to change government behavior, get people involved in 
the decisionmaking on what works in that particular country.
    Second, my point about institutional blockages relates to 
the Bank's results measurement system. I think this is 
absolutely key to the incentives for staff, motivating 
decisionmaking in country operations. The Bank certainly needs 
a global standardized assessment system so that it can market 
its quality to the people who fund it. But I think there needs 
to be some reassessment of what incentives need to be in place 
for staff in decisionmaking in very, very difficult political 
and security contexts.
    The third area I think I wanted to mention is the 
administrative budget of the World Bank. This is currently--it 
is very, very complex, but in simple terms, it is pegged to the 
IDA allocation to that particular country. So you can end up in 
a situation with immensely difficult, fragmented, factional 
political systems where the Bank is very short staffed on the 
ground. And I would urge the donors to IDA and the board 
members to it to allow a little bit more flexibility to put 
people on the ground working in these difficult political 
environments so that the Bank can provide the most effective 
technical accompaniment, facilitating ironing out problems and 
working with national actors, and ensuring the participation in 
negotiation, that it involves the people of these countries in 
the Bank's work and in the national-led development.
    So my third and last section is just looking at the ways 
forward for the World Bank. I hope that this committee and the 
United States Representatives working with the Bank can do 
this. First is to shift the mind set. I think I absolutely 
applaud President Zoellick for driving down throughout the Bank 
attention to strategic directions on fragility and conflict. I 
think it is absolutely essential. And at the same time, to 
continue to support this emerging governance and accountability 
facility, looking at how Bank analysts, Bank public-sector 
governance expertise can help deliver on poverty reduction and 
social service delivery efforts.
    I think the Bank needs to accelerate its efforts to adapt 
and nuance its results framework so that it can integrate 
qualitative as well as quantitative results measurements.
    And lastly, the point I mentioned about the administrative 
budget, it is absolutely essential that the Bank is able to 
accompany, facilitate, and sort out the difficulties that 
inevitably arise in these incredibly difficult operating 
environments like Liberia, Burundi, and Sri Lanka. The list is 
extremely long, too long.
    Thank you very much.
    [The prepared statement of Mr. Bell can be found on page 52 
of the appendix.]
    The Chairman. Finally, Lori Udall, who is a witness who has 
been here before and was in fact very much involved when we 
acted 15 years ago to do the inspection panel and related 
matters. She is a senior advisor to the Bank Information 
Center.

 STATEMENT OF LORI UDALL, SENIOR ADVISOR, THE BANK INFORMATION 
                             CENTER

    Mr. Udall. Thank you, Chairman Frank, Representative 
Bachus, and other committee members.
    Fifteen years ago, during the negotiations of the 10th 
replenishment of IDA, it was you, Chairman Frank, with 
bipartisan support, who provided the vision and leadership by 
pressuring the World Bank to establish two public 
accountability reforms: The creation of the World Bank 
Inspection Panel; and the revision of the Bank's information 
disclosure policy. These two reforms constituted a sea change 
in the way the Bank relates to civil society and to the people 
who are adversely affected by Bank projects and programs.
    For those committee members who may not know, the panel is 
a three-member team independent of Bank management that reports 
directly to the Bank's Board of Executive Directors. The panel 
receives and investigates claims from people who are directly 
adversely affected by Bank projects as a result of violations 
of Bank policy. The panel remains, to this day, the only avenue 
for affected people to obtain an independent investigation of a 
World Bank public project or to have an indirect voice at the 
board level.
    The panel was the first of its kind among the international 
financial institutions and it set a precedent for the other 
banks. Today, all the regional banks also have similar 
mechanisms. And the commercial arm of the World Bank also has a 
mechanism called the Compliance Advisor Ombudsman.
    A testament to the panel's importance is the extent to 
which it has been used by adversely affected people and 
communities in developing countries. In the 15 years that it 
has existed, the panel has processed 52 claims, with mostly 
positive outcomes for claimants. In its 2006-2007 annual 
report, the panel stated that it was the busiest year that it 
had since its creation. It registered six new claims, completed 
two investigations, and conducted three investigations 
simultaneously; 2008 has also been an extremely busy year. The 
existence of the panel has produced project reform and also 
created political space for affected people in developing 
countries.
    Some of the outcomes have been that claimants have received 
compensation; environmental impacts have been mitigated; 
project information has been released; resettlement packages 
for people have improved; evictions have stopped; and projects 
have been redesigned and, in some cases, suspended or 
cancelled.
    Additionally, research on the impacts of the panel on the 
Bank as an institution suggest that risky and potentially 
damaging Bank projects have not made it to the drawing board 
due to the panel's existence. It has also caused the Bank to 
rethink how it assesses risky projects and implements safeguard 
policies.
    The cumulative evidence underscores that the panel is doing 
a superb job within its prescribed mandate and powers. However, 
there is still quite a bit of work that needs to be done to 
ensure that the panel process is more user-friendly for the 
affected people and that these people are consulted about the 
remedies and solutions to their problems and to project 
improvement.
    The recommendations that we are making today are relatively 
simple reforms to strengthen the panel process without actually 
changing the panel's governing statute. The first 
recommendation we are making is about claimant access to the 
panel and the panel process.
    The current panel process has important instances where the 
claimant is completely left out of the process, and it is 
difficult to get information or to engage with management or 
the board. For example, the claimants are rarely involved in 
the remedies and the project improvements that are put forward 
by management. This needs to change. Management already has a 
mandate to involve the claimants, but they have not implemented 
this mandate.
    The claimants also don't have access to important 
information during the panel process. For example, claimants 
don't see the panel's final report or management's response 
until it has already gone to the Bank board and the board has 
made a decision. So then it is too late for the claimants to 
actually influence the outcome.
    The second issue is panel monitoring and follow-up. The 
panel currently has no mandate to follow-up or to monitor 
compliance for improvement after the claim has gone through the 
cycle. Experience suggests that monitoring compliance is a 
critical element in enforcing the reforms and the remedies that 
need to be implemented on the ground. Monitoring would also 
provide the board with continued independent information about 
the project and put pressure on management to follow through 
with the improvements.
    The third area is the selection process for panel members. 
The selection process has grown increasingly nontransparent and 
secretive over the years. In the early days of the panel, the 
executive board was much more involved and there was much more 
openness to civil society recommendations. Currently, the 
selection committee has four people, two from management and 
two from the board. In our view, it is a conflict of interest 
for management to be involved in the selection process. We 
therefore recommend that the structure of the selection 
committee be reformed to include a civil society 
representative, the chair of the inspection panel, and two 
board members. We also recommend that the process be opened up 
more; that it be publicly announced and advertised; and that 
both the panel and civil society be engaged and consulted.
    The fourth area is public outreach. Despite public outreach 
activities of the panel, the panel is still not well known or 
understood in many developing countries. And the World Bank 
Board should empower the panel to increase its public outreach 
programs.
    The final one is the budget process. We just hope that 
Congress will monitor this, because some of our 
recommendations, such as follow-up and a more robust outreach 
panel, would require additional resources for the panel.
    In conclusion, the inspection panel is still an important 
and effective tool for communities. With these few innovations, 
the panel could become even more accountable and responsible to 
the people who need it most.
    We thank you, Chairman Frank, and we thank all the 
committee members for your leadership and your future action on 
strengthening the inspection panel process.
    [The prepared statement of Ms. Udall can be found on page 
71 of the appendix.]
    Mr. Cleaver. [presiding] Thank you very much.
    Chairman Frank will return shortly.
    All of you hit on some things that I think are critically 
important.
    And I am sorry Mr. Lowery is not here, although I do 
appreciate his candor for the most part. But he mentioned in 
his testimony that the World Bank has moved over the past 10 
years toward much greater transparency, and I am sure there is 
some greater transparency. But, you know, I raised the question 
with him about the Web site issue, whether that conditionality 
was on the Web site. I guess someone on his staff said ``yes.''
    You are saying ``no,'' Ms. Molina-Gallart, and we were 
unable to find it either.
    So if there is some transparency, greater transparency, 
perhaps it is not as great as we were led to think during his 
testimony.
    Do any of you believe that there is a need for the World 
Bank to revisit the definition of ownership so that the 
policies are country-selected rather than Bank-selected in an 
attempt to make sure that government-supported Bank selection 
is not the predominant factor in selections? Anyone?
    Ms. Molina-Gallart. Yes. Yes, I guess I can respond to that 
one, because one of my recommendations was precisely to revisit 
the Good Practice Principles. And conditionality, one of them; 
it is ownership the first of them.
    Basically, what has happened all too often with ownership 
is that policies have been designed by the Bank and then sold 
to the countries, and then the Bank has said they are owned by 
the country. But this is not what we think that an owned policy 
should be. It should be not only country-selected, but it 
should also be country-led. That is why sometimes we talk about 
country leadership rather than country ownership, country 
leadership over the development process.
    Mr. Cleaver. Thank you.
    I am going to yield now to the ranking member, Mr. Bachus.
    Mr. Bachus. Thank you.
    Let me just say to all the panelists, I think your 
testimony, which I have read much of it, and I will read it in 
its entirety, and our staff will, too, has already been very 
helpful on certain issues, such as privatization.
    You know, some of the adverse effects of conditionality or 
adverse effects of some of the actions of the World Bank, I 
think particularly, Ms. Udall, it is fascinating how the panel 
and its very existence has changed, has resulted in some 
positive outcomes or at least avoided negative outcomes, too.
    I am particularly interested at some point in talking about 
China, and if the panel has been able to operate successfully 
and made changes in their policy or in some of the World Bank 
projects there, where, you know, in the past, some have 
negatively impacted on people.
    I will yield back at this time, but we may at some point 
follow-up with you for additional questions about your 
testimony.
    I appreciate your valuable testimony.
    And I appreciate, Mr. Beckmann, your emphasis on the fact 
that you were for conditional funding or partial funding, I am 
not sure, and that now you advocate full funding. I do believe 
the World Bank has made positive strides, so thank you.
    Mr. Cleaver. Mr. Bell?
    Mr. Bell. Yes, I would just like to make a point about 
conditionality. It is absolutely not wrong in and of itself. It 
depends what the conditions relate to. There are countries, I 
mean take Burundi as an example. My organization has been very 
closely involved in efforts to involve coffee growers in the 
reforms to the coffee sector. Currently, that sector is 
deliberately unaccountable and does not deliver benefits 
equitably to the people who grow coffee. Now, the World Bank 
has a very delicate negotiation with the IMF about what kind of 
approach to take with the Burundian government, which currently 
is--the ruling party is defying its own constitution and 
barring some rebel members of it from sitting in parliament. 
Parliament does not pass laws in the Burundian parliament. So I 
think when considering conditionality, it is essential to look 
at the details of the situation in the country.
    Mr. Bachus. And I would totally agree. I am not saying 
conditions are not--you know, they can be good or not good. We 
call them safeguards when they are good, or reforms. You know, 
they sometimes slow the process. Sometimes that is good. And 
you also have issues of sovereignty. But I think your testimony 
does accurately outline some of the problems that the World 
Bank has and how we need to be careful with conditionality and 
make sure that they benefit the people.
    But thank you.
    Mr. Cleaver. Thank you, Mr. Bachus.
    One question, and then I will pass this on to others. Our 
colleagues, Mr. Bachus and Ms. Waters, introduced the Jubilee 
Act. And it was passed, of course, and it deals with the whole 
issue of debt forgiveness. I was one of the sponsors, and I 
think it was one of the better things we have done. If we 
needed a Jubilee Act 2, what would you want to see us include 
in Jubilee--actually, Jubilee is supposed to be every 8 years. 
I will have to figure out a way to make it make sense with some 
numbers. But Jubilee 8.2, whatever, what do you think we would 
need to add?
    Mr. Beckmann?
    Mr. Beckmann. Well, I think it would be really helpful for 
the committee to look into this current crisis in world hunger. 
I think it is going to last for a long time. People expect 
these high food prices to moderate a little bit but to stay 
high for at least 5 years. Fuel prices aren't going to go down. 
So I am concerned.
    I am delighted that the World Bank has already set up and 
is operating this rapid response facility. But the amounts of 
money they are talking about are not close to the needs of the 
countries, as far as I can see.
    And then the Bank has put in some grant money, but mostly 
this is lending. And the IMF, I think in June, is planning to 
set up a similar facility to lend money to these desperately 
poor countries that are under incredible pressure, not of their 
own making. But that is going to be loan money.
    Mr. Cleaver. Yes.
    Mr. Beckmann. So these countries are going to go very 
rapidly into debt. Those low-income governments, those low-
income country governments have responded to the current crisis 
before anybody realized it was a global crisis, because when 
the price of their staple went up by 100 percent, they knew 
that they couldn't let that price go up for their people by a 
100 percent. So they are taking action, you know, the kind of 
thing that the IMF shakes its finger at. And for most of the 
poor people in the world, there is no program, no food aid that 
is going to reach them. It is only the moderation of the prices 
that is going to help. So those poor country governments need 
to take the hit. And it is going to translate into deeper debt 
for those governments.
    So I would think that the next--we need a Jubilee. And the 
first thing is to help the world figure out--really, everybody 
is--I think people don't yet realize how serious a problem this 
is. And it is going to mean that the--I think what the IMF and 
the World Bank are doing with these rapid response facilities 
is the best response that is underway. But it is too little, 
and it is debt rather than grants. So that is--I would love the 
committee to get into that. I think we are going to need a 
Jubilee before we get to the 7th year.
    Mr. Cleaver. Thank you.
    The Chairman. If the gentleman would--if I could indulge, 
because I have a meeting I am going to have to go to, so if I 
could ask my questions now, and then the gentleman from 
Missouri would stay on.
    I appreciate the kind words.
    Let me ask, on conditionality, where I believe it certainly 
is a good sign that we are hearing people now not defend 
conditionality--let's make the distinction. I assume we agree 
that there is a kind of conditionality that is important, and 
that is the anti-corruption, pro-transparency. There is almost 
a procedural substantive split. And I think that is a very 
important point. In our amendments on the Jubilee Act, that is 
very much what we said.
    But on the substantive conditionality, there, again, we 
want to stress that the argument is not necessarily that these 
things are bad, but that they ought to be done locally.
    I also think there are some things--Mr. Beckmann, I 
appreciate what you said about the fertilizer. But in fact, as 
I recall, it is the case that was a kind of a reverse on the 
part of the Bank. We had the example, someone in the New York 
Times wrote it up, where the Bank was objecting to Malawi's 
policy of subsidizing fertilizer.
    Would you comment? I mean, this was a reversal. Can we--is 
this something we can sort of take for granted going forward? 
Do they understand the mistake now?
    Mr. Beckmann. I think that the Bank has tended to be 
critical of big programs of subsidized fertilizer, subsidized 
seeds. And the Bank has pushed over the years to reduce those 
subsidies, you know, on the grounds that in fact they are 
financially difficult for governments to sustain. You know, the 
subsidies tend--you end up with subsidized fertilizers going to 
certain farmers, often the bigger farmers who can pay under the 
table to get some government official to give them subsidized 
fertilizer. So the Bank has had a more market approach over the 
years to subsidies in agriculture. They have also tried to 
reduce the price ceilings that many developing countries put on 
agricultural output.
    The Chairman. Let's stay with fertilizer.
    Mr. Beckmann. No, no, the point, Mr. Chairman, is just that 
in this crisis, what I have seen is that the Bank is moving 
quickly to get money to governments to subsidize fertilizer, 
subsidize seeds because that is what is needed now. So it is an 
example of flexibility.
    The Chairman. I understand that. But in the first place, if 
it is helpful for growing food, maybe if we had been doing this 
before, we wouldn't have had quite as much of a crisis. Are you 
suggesting this is just something that is just going to be that 
way for the crisis, and if and when this crisis ends, they are 
going to revert to opposing these subsidies for fertilizer?
    Mr. Beckmann. It is a response to the crisis. I don't know 
how long it is going to go on. But I think the Bank is right to 
say that farmers ought to get a fair price for their food.
    The Chairman. Mr. Beckmann, I don't understand why we are 
having trouble here. I am talking about the fertilizer subsidy. 
I don't understand how subsidizing fertilizer means that they 
are not getting a fair price for their food. Let's stick with 
this. Are you saying, then, that once this crisis is over, you 
would think it okay for the Bank to revert to a policy of 
opposing the subsidy of fertilizer and seed?
    Mr. Beckmann. Yes. I think there are better ways to use 
money to support farmers than subsidizing fertilizer.
    The Chairman. What would they be?
    Mr. Beckmann. Invest in rural roads that all farmers can 
use, and need.
    The Chairman. But you do support the subsidy of fertilizer 
and seed now because there is a food crisis.
    Mr. Beckmann. Right.
    The Chairman. Do you anticipate that is going to go away 
anytime soon?
    Mr. Beckmann. I don't anticipate it. I don't know what I 
think about a year from now, or 2 years from now.
    The Chairman. But as long as there is a food shortage, you 
would be in favor, if they chose to subsidize fertilizer and 
seed.
    Mr. Beckmann. Right now the price of fertilizer has gone up 
so quickly that poor farmers cannot respond to higher food 
prices by planting.
    The Chairman. As long as we have this food crisis--I mean, 
you talk about the World Bank's policy on farms. What do you 
think the World Bank's evaluation of the American agriculture 
bill would be?
    Mr. Beckmann. I think they have been clear about it, that 
trade-distorting, protectionist subsidies are bad for global 
development.
    The Chairman. So the standard by which the World Bank has 
been critical of some of the developing countries, if, in fact, 
that were applied to the United States, it would be against our 
agricultural policy.
    Mr. Beckmann. Yes. And they would be right.
    The Chairman. I think that is something that people ought 
to consider. I suppose you can be in favor of either side, but 
it is hard to understand how people could advocate both.
    I thank the gentleman.
    I will yield back.
    Mr. Cleaver. Thank you. We will now call on the gentlelady 
from California Ms. Waters.
    Ms. Waters. Thank you very much.
    I would like to thank the members of the panel for being 
here today. I am sorry I am late. We had a markup in another 
committee. But I really needed to be here when the Honorable 
Clay Lowery, the Assistant Secretary for International Affairs 
of the United States Department of the Treasury, was here 
because I basically needed to talk about the global food crisis 
and suspension of debt payments, and, of course, I wanted to 
ask some very pointed questions about Haiti. I suspect that our 
witnesses here today are all of similar opinions about what is 
happening with this global food crisis.
    Let me just say that last month, this committee held a 
hearing on the global food crisis, and while the crisis has 
several causes, it was clear from the testimony that of the 
causes was the policies of the World Bank. Since the early 
1990's, the World Bank has promoted a free-market approach to 
agriculture in developing countries. Developing countries were 
instructed to eliminate government agriculture programs such as 
grain marketing boards, food storage and distribution services, 
and subsidies for seeds and fertilizer. I think I heard some 
reference to that a moment ago.
    Developing countries were simultaneously pressured to 
liberalize their trade policy, allowing food to be imported. 
Farms in developing countries were forced to compete with 
imports from the United States and the European Union, where 
agricultural production continued to be heavily subsidized. 
Theoretically these policies were supposed to improve 
efficiency and create opportunities in the private sector. 
Instead they contributed to the decline of agriculture.
    According to the testimony of Rob Patel of the Institute 
for Food and Development Policy, import surges became common. 
Import surges occurred when a developing country lowered import 
tariffs on agricultural goods and then was flooded with these 
goods. The result was often a decline in domestic production. 
It is interesting.
    In Senegal, tariff reduction caused an import surge in 
tomato paste, and local production was cut in half. In Chile, 
an import surge in vegetable oil caused local production to be 
cut in half. In Ghana, local rice production fell from over 80 
percent of domestic consumption in 1998 to less than 20 percent 
in 2003.
    Rob Patel also testified that the World Bank continues to 
condition loans to developing countries on free-market 
agricultural policies despite past failures. In the World 
Bank's most recent round of poverty-reduction support credits, 
Tanzania was required to prepare four crop boards for sale. 
Benin was required to privatize its cotton sector. And Moldova 
was required to liberalize agricultural support programs.
    One country that decided to ignore the World Bank's advice 
was Malawi. Following a disastrous corn harvest and a resulting 
famine in 2005, the government reinstated fertilizer subsidies. 
The result was record-breaking corn harvests in 2006 and 2007. 
Acute childhood hunger has fallen considerably, and Malawi was 
able to export corn to Zimbabwe and sell excess corn to the 
World Food Program last year.
    Despite the fact that all of us are so supportive of debt 
relief and some of the other things that we do, I think that we 
are not very effective in dealing with some of these issues. I 
suspect and I know it is long past time for the World Bank to 
change its approach to agricultural development.
    Do you have any advice for us about how we can be more 
effective in getting the World Bank--and tell me what some of 
the programs and organizations are doing to try and offer 
advice and pressure to the World Bank to change its approach to 
agricultural development. Any enlightenment that you can do, 
that would be helpful to us. Anybody?
    Mr. Bell. My first piece of advice is not to cut off your 
nose to spite your face. There is a great difference between 
emergency agricultural relief, such as Mr. Beckmann has talked 
about, and long-term IDA projects to try to transform the 
operating environment in which poor people are trying to grow 
food and an income.
    The two countries that I have spent considerable time in 
the last 2 years, Nepal and Burundi, both of these countries, 
the vast majority of the poorest grow food for themselves. They 
are not really affected by the surge of imports because they 
are not able to earn an income to be able to buy food.
    There are multiple factors locally that affect the ability 
of people to feed themselves. I think that to ignore the 
governance issues, the fact that subsidies on fuel may only--by 
cutting them, you may only be affecting the very rich or the 
people who are able to be rich.
    So I think that it is absolutely essential to focus on how 
the bank takes its decisions rather than ``X'' or ``Y'' policy, 
per se, is wrong.
    Ms. Waters. Any other comments? If not, I would like to 
move to--you probably have had some discussion on this maybe 
today--suspension of debt payments for decision point 
countries. My question is: Would you support an immediate 
suspension of debt service payments by all of the HIPC decision 
point countries while they continue to implement debt relief 
conditions and food prices remain high? Anyone?
    Mr. Beckmann. What I think we are going to need is 
additional debt relief. We are going to need concession to 
these rapid response facilities--it is mainly, as I understand 
it--I mean, on the impact of the hunger crisis, we really don't 
know a lot yet, but I think it is a slightly different group of 
countries. It is the low-income countries that import food and 
fuel where people are going to die and where the governments 
are going to go broke. So there needs to be some additional 
funding through debt relief, additional concessional funding.
    There needs to be a response. I am not sure whether it 
should be just what you are suggesting as you take all those 
HIPC countries. Maybe it is not exactly that set of countries, 
but the basic idea is right, that we need to provide additional 
funding for a lot of low-income countries that have suddenly 
been put in a much worse situation and are likely to be there 
for the foreseeable future.
    Ms. Waters. The decision point countries, there are 10: 
Afghanistan; Burundi; Central Africa Republic; Chad; Democratic 
Republic of Congo; Republic of Congo; Guinea; Guinea-Bissau; 
Haiti; and Liberia.
    I have been really disturbed by the food riots in Haiti, 
and I don't understand why--I sent a letter to Treasury 
Secretary Paulson urging him to use his influence to expedite 
the cancellation of Haiti's debts and to immediately suspend 
all further debt payments from Haiti. Fifty-four Members of the 
House signed the letter, including Chairman Frank and Ranking 
Member Bachus.
    Unfortunately, I received a disappointing response to my 
letter. Treasury informed me that Haiti is not expected to 
receive complete debt cancellation at the present time, but 
Haiti is receiving other forms of aid. While I appreciate that 
the international financial institutions and the United States 
are providing loans and grants to Haiti, this is simply, of 
course, not enough while Haitians are starving. I, once again, 
will call on Treasury Secretary Paulson to do everything in his 
power to provide immediate debt cancellation for Haiti because 
I don't see how we can in good conscience accept payments from 
Haiti at this time of desperate need.
    Haiti owes over $1 billion to multilateral financial 
institutions, and Haiti is scheduled to pay more than $48 
million in debt service this year. This is money that could be 
spent to develop Haiti's economy, rebuild crumbling 
infrastructure, and expand agriculture. It could be spent on 
food for hungry people. Instead, it is being used to service 
Haiti's debts.
    How loud is the outcry from organizations such as Bread for 
the World and Bread for the World Institute and other 
organizations about what we are watching and what we are saying 
in this food crisis in particular in Haiti? What are people 
saying?
    Anybody? Yes.
    Mr. Beckmann. Mr. Lowery--when you weren't here--said that, 
in fact, they have arranged cancellation of virtually all of 
Haiti's debt by early next year from the multilateral 
institutions. He is not here, but I think what I heard was he 
must have gotten your letter and paid attention to it.
    Ms. Waters. He didn't pay attention to it if he said they 
will do it by next year. I am talking about immediately.
    Mr. Beckmann. The question you addressed on Bread for the 
World, we are being just as loud as we can be about--I think 
the right word for it is a hunger crisis. It is not just food, 
it is fuel. And the issue is not only--I mean, it is that high 
food prices are what is making people hungry, but the crisis is 
that people--most of the world's poorest people are getting 
poorer, and people who are just out of poverty, maybe 100 
million people, have been driven into extreme poverty, we 
think. So the crisis is the hungry people, and there is no 
relief in sight.
    The policy response to date, the supplemental appropriation 
that Congress is considering, the rapid-response facilities of 
the Bank and the Fund, the extra money that has been collected 
for the World Food Programme are a drop in the bucket compared 
to the crisis.
    So it is not only in Haiti. In Ethiopia, right now, we have 
starving babies again. Ethiopia has made wonderful progress. In 
1990, 30 percent of the kids were in school. Now 90 percent of 
the kids are in school. There is lower child mortality. So they 
have done a lot. But over the last few years they have been 
struggling with these high food and fuel costs. Now they have 
drought. So we are seeing starving babies.
    I think in a number of the fragile states, countries like 
Liberia, where political solidity just isn't there, then if you 
take the staple crop, the thing that people eat, and you double 
the price of that, some of those governments are going to fall. 
So I think we are going to see a string of humanitarian crises 
and we are going to see a string of political crises. In my 
judgment, none of us yet has really picked up on how big a 
setback in the world's development we are experiencing, so 
Bread for the World is trying to sound the alarm.
    Ms. Waters. What should we be doing?
    Mr. Beckmann. I liked the idea of a Jubilee II. You held a 
hearing on the food crisis just a month ago, but I think that 
idea, to look at what is the Bank doing, what is the Fund 
doing, what the institutions under your jurisdiction, how are 
they responding, and what more could be done, because my guess 
is that--I think actually the Bank and the Fund, what they are 
doing to help the low-income country governments, and in some 
cases they do have welfare systems, so they need to strengthen 
those systems of welfare, of assistance to--humanitarian 
assistance to poor people. They have food shops, ration shops.
    So some of this money from the Bank and the Fund is 
supporting that, some of it is subsidizing fertilizer and seed 
so that farmers can plant for the next harvest. I think what 
they are doing is about the best thing that the world is doing, 
but it is not nearly on the right scale, and it is mostly loan 
money. It can't be loan money. These countries are broke.
    I think the committee could accelerate the process of 
getting the U.S. Treasury, the Bank, the Fund, and the other 
multilateral banks to focus on this. Ask the African 
Development Bank what they are doing. It would just help to 
move the whole thing forward. In fact, none of us has full 
knowledge; nobody knows how many people--for example, I am 
guessing it is 800 million people--have taken a hit of 10 to 50 
percent in their real income. I said that to the director of 
the agriculture department at the World Bank, and I said, 
``Does that strike you as crazy?'' He said, ``No. We are trying 
to get the numbers together, but that strikes me as 
plausible.''
    What is striking is that nobody knows the full scale of 
this problem, so the committee could really help just by asking 
about it and then pushing for more vigorous response.
    Ms. Waters. Thank you very much.
    Yes?
    Ms. Molina-Gallart. I would like to add another point, 
because I think that we have been focusing our responses on 
what needs to be done in the context of emergency, but I think 
it is important to think of long term as well. And to think of 
longer term, we have to assess the mistakes of the past. I 
think that, quoting the testimony that was here a few days ago, 
you have mentioned a number of them.
    Since we are speaking about conditionality today, we have 
to be aware and learn from the past and the conditions that 
undermine the agriculture in a number of countries. I do agree 
with other testimonies that have mentioned there is no single 
response to what should be done in the agriculture sector to 
secure that these don't take place again. But what is very 
important is that these conditions and policy advice on 
agricultural development, it is not biased simply or uniquely 
to the market, strictly market model, but rather that since we 
are talking about low-income countries with little capacity to 
devise and design different policy scenarios, what 
international institutions have to do is not provide one single 
response, but help to draft different policy scenarios on 
different policy choices and what could be the impact of each 
of these in terms of poverty reduction. This is the way that 
they can assist countries to take better-informed policy 
decisions.
    Ms. Waters. Thank you very much for your generosity.
    Let me say, Mr. Chairman, I have this old-fashioned belief 
that to the degree countries can grow their own food, and 
particularly their basic crops, such as rice and wheat, then 
they will not be hungry.
    Mr. Cleaver. We thank the gentlelady from California. Her 
Jubilee Act is consistent with what she is saying now, and the 
more I hear today, the more I am thinking that we do need 
Jubilee II.
    I will now call on the gentlelady from Wisconsin Ms. Moore.
    Ms. Moore of Wisconsin. Thank you so much, Mr. Chairman. 
This has been a fantastic panel. Thank you for your patience.
    I have listened very carefully to all of your testimony, 
and it occurs to me--unless I am hearing things wrong--that 
while we have made great progress in bringing some 
accountability to the World Bank's lending practices, its 
transparency, you mentioned the 15-year anniversary, Ms. Udall, 
of the inspection panel, and some of the problems associated 
with that, that claimants don't really have access to the 
panel. They are rarely involved in remedies. When we do have 
problems--I guess I want to associate myself with the opening 
remarks of Congresswoman Waters. I think she very aptly 
described some of the problems that we have heard about when 
there are--for example, in Ghana, where we recently visited, 
this committee, where cheap imports of rice undermined the 
local production of rice in that country.
    I also am hearing very clearly what Mr. Beckmann is saying 
about hunger really being the canary in the coal mine of other 
kinds of problems. Certainly Ms. Molina-Gallart's testimony has 
been very important in terms of identifying the continued 
conditionality, bad conditionality, because there are good 
conditionalities that ought to be expected of anyone, but bad 
conditionality continuing to pressure these low-income 
communities.
    I want to start out by asking Mr. Bell a question. You 
mentioned something in your testimony about how we need to 
shift the minds of the World Bank. You also talked about the 
organizational structure and culture and a reassessment, I 
believe, of underwriting criteria and looking at the 
administrative budgets involved. I reiterate, plucking out 
certain comments that you made, tying them to a comment that 
Mr. Lowery made about the complex international aid 
architecture, and I renew a question that I made to Mr. Lowery 
about whether or not what we are seeing is the development of 
very complex and sophisticated world trade policies, economic 
policies, the OECD, the WTO, subsidies in this country, farm 
subsidies in this country, and then, on the other hand, not 
allowing subsidies in other countries, conditionality that 
prevents other countries from raising tariffs so that they 
empower European and the United States exports and products.
    Are we at a point that we really need to look worldwide at 
an organizational structure and culture of lending where you 
have these--you always have winners and losers, but where you 
have some people being thrust into deep, extreme poverty, and 
others being wealthy? Are we at that point, Mr. Bell?
    Mr. Bell. That is an amazingly complex question. It goes 
beyond the entanglement of institutions to different units and 
teams and groups within institutions having corresponding 
interlocutors in different groups and units of international 
institutions. So everything is interlinked.
    To take the example of how the OECD is a collection of 
bilateral donors, and the Development Assistance Committee 
works very closely with the World Bank and the United Nations 
Development Program to develop principles for more effective 
engagement in fragile states, or more globally, the Paris 
Declaration on Aid Effectiveness, I think there are definitely 
strong efforts within these institutions to harmonize the 
efforts and achieve coherence in their policies, but there are 
enormous competing priorities, I couldn't agree more.
    It comes back to my point about how you pay attention to 
the detail and your ability to pay attention to the detail, 
because the places that I have worked in the last 2 years, a 
lot of the reasons for hunger relate to the decision of local 
people that they want to be associated with a higher income 
bracket and eat rice rather than millet or barley that they can 
grow more easily locally.
    The ownership point is exactly right. I think we have to 
segregate and say, ownership by whom? An illegitimate or 
oppressive or ineffective government can be more of a problem 
than the actual capacities of local people to deal with the 
problem. It is a balance.
    Ms. Moore of Wisconsin. So, with your permission, Mr. 
Chairman, my time seems to have expired, can I just follow up 
with the other panelists?
    The Chairman. Yes.
    Ms. Moore of Wisconsin. Given this, I guess I would ask Mr. 
Beckmann or Ms. Molina-Gallart or Ms. Udall, any of you who 
would like to chime in to my remaining time, do you think while 
there is a lot of demonization of the World Bank, and, of 
course, the only reason we know of their failings is because 
they have been more transparent, they have published what they 
have done, and they are critical in terms of helping the world, 
but do you think that the World Bank really has its hands tied 
in terms of trying to render assistance to low-income 
communities, to countries, to communities that are 
postconflict, because, in fact, they are coming under intense 
pressure from all these other financial institutions to create 
a favorable environment for the private sector, to create a 
favorable environment for European and donor countries' 
exports?
    Do you think that the World Bank does not have the kind of 
independence that it needs to get away from conditionality? Do 
you think--this is sort of a backdoor approach to the same 
question I asked Mr. Bell--that in terms of a major reform, we 
have to look at all of the competing interests in the rest of 
these financial institutional structures, the culture, as it 
were?
    Mr. Beckmann?
    Mr. Beckmann. I really don't think that the World Bank is 
hostage to the commercial interests in the industrialized 
countries. I think it is doing a pretty decent job on the 
issues that the other panelists talk about. There is an 
understanding that--
    Mr. Moore. If not the World Bank--you talk about food. What 
about commodities; I mean, food and trade conditions?
    Mr. Beckmann. I think in terms of restructuring the 
international architecture for development, some of the reform 
needs to happen in the U.S. Government. We have 36 institutions 
within the U.S. Government that provide development assistance 
in developing countries. In fact, the World Bank does a pretty 
decent job of trying to coordinate the development efforts of 
many donor governments, but it doesn't help that the United 
States Government has 36 different agencies of its own going to 
developing countries, going to poor countries to try to run 
little development programs.
    In the area of trade, part of the problem is in 
agricultural trade that our policies undercut the capacity of 
African farmers, have for 30 years undercut the capacity of 
African farmers to produce. It is that rice that I think you 
mentioned; subsidized rice is being produced in Georgia and 
Arkansas and Texas, and it is subsidized because of the U.S. 
farm bill. We just passed a farm bill that maintains those 
subsidies.
    So, in my judgment, in agriculture, before this hunger 
crisis is over, we are going to need a new Doha Round, we are 
going to need--developing countries want us to reduce our 
protectionism in agriculture, and that can be part of a 
process; not a strictly ideological process, but broadly we 
need an agriculture that is less protectionist, less clunky, 
more market-oriented, more responsive to changing needs, and 
because poor countries in general have comparative advantage in 
agriculture, a more open, global market in agriculture will 
help people get out of poverty.
    Ms. Molina-Gallart. Going back to the World Bank, 
definitely it will require that position, as the previous 
speaker was saying, change at the donor level by the 
governments who sit at the Executive Board and at the Governing 
Board of the World Bank. But obviously the institution is 
fragmented, as any other big institution, and it will require 
as well changes in management and staff. So basically, if the 
executive board improved good practice principles and 
conditionality, as they did in 2005, but an improved set, and 
monitoring and performance assessment mechanisms were set to 
monitor progress at the level of the staff and the management, 
probably in 2 years' time from now we could take another step 
forward, as we did from 2005 until now.
    Mr. Cleaver. Thank you.
    Are there any other panelists who would like to respond? If 
not, we want to thank all of you very much for your testimony. 
I think your testimony balanced quite well the testimony of Mr. 
Lowery, and we appreciate the suggestions and the 
recommendations that you brought forward.
    There may be some additional questions for this panel which 
members may wish to submit in writing. Without objection, the 
hearing record will remain open for 30 days for members to 
submit written questions to these witnesses and to place their 
responses on the record.
    The hearing is adjourned.
    [Whereupon, at 12:32 p.m., the hearing was adjourned.]


                            A P P E N D I X



                             June 18, 2008


[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]






