[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]