[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]






 
                  EXAMINING RESULTS AND ACCOUNTABILITY


                           AT THE WORLD BANK

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

                                HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON MONETARY

                            POLICY AND TRADE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 22, 2017

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 115-8
                            
                            
                            
                            
                            
                            
  
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
 
 
 

          
              

                U.S. GOVERNMENT PUBLISHING OFFICE
                   
 27-249 PDF             WASHINGTON : 2018       
____________________________________________________________________
 For sale by the Superintendent of Documents, U.S. Government Publishing Office,
Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800
  Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001                               
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PETER T. KING, New York              MAXINE WATERS, California, Ranking 
EDWARD R. ROYCE, California              Member
FRANK D. LUCAS, Oklahoma             CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   NYDIA M. VELAZQUEZ, New York
STEVAN PEARCE, New Mexico            BRAD SHERMAN, California
BILL POSEY, Florida                  GREGORY W. MEEKS, New York
BLAINE LUETKEMEYER, Missouri         MICHAEL E. CAPUANO, Massachusetts
BILL HUIZENGA, Michigan              WM. LACY CLAY, Missouri
SEAN P. DUFFY, Wisconsin             STEPHEN F. LYNCH, Massachusetts
STEVE STIVERS, Ohio                  DAVID SCOTT, Georgia
RANDY HULTGREN, Illinois             AL GREEN, Texas
DENNIS A. ROSS, Florida              EMANUEL CLEAVER, Missouri
ROBERT PITTENGER, North Carolina     GWEN MOORE, Wisconsin
ANN WAGNER, Missouri                 KEITH ELLISON, Minnesota
ANDY BARR, Kentucky                  ED PERLMUTTER, Colorado
KEITH J. ROTHFUS, Pennsylvania       JAMES A. HIMES, Connecticut
LUKE MESSER, Indiana                 BILL FOSTER, Illinois
SCOTT TIPTON, Colorado               DANIEL T. KILDEE, Michigan
ROGER WILLIAMS, Texas                JOHN K. DELANEY, Maryland
BRUCE POLIQUIN, Maine                KYRSTEN SINEMA, Arizona
MIA LOVE, Utah                       JOYCE BEATTY, Ohio
FRENCH HILL, Arkansas                DENNY HECK, Washington
TOM EMMER, Minnesota                 JUAN VARGAS, California
LEE M. ZELDIN, New York              JOSH GOTTHEIMER, New Jersey
DAVID A. TROTT, Michigan             VICENTE GONZALEZ, Texas
BARRY LOUDERMILK, Georgia            CHARLIE CRIST, Florida
ALEXANDER X. MOONEY, West Virginia   RUBEN KIHUEN, Nevada
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana

                  Kirsten Sutton Mork, Staff Director
               Subcommittee on Monetary Policy and Trade

                     ANDY BARR, Kentucky, Chairman

ROGER WILLIAMS, Texas, Vice          GWEN MOORE, Wisconsin, Ranking 
    Chairman                             Member
FRANK D. LUCAS, Oklahoma             GREGORY W. MEEKS, New York
BILL HUIZENGA, Michigan              BILL FOSTER, Illinois
ROBERT PITTENGER, North Carolina     BRAD SHERMAN, California
MIA LOVE, Utah                       AL GREEN, Texas
FRENCH HILL, Arkansas                DENNY HECK, Washington
TOM EMMER, Minnesota                 DANIEL T. KILDEE, Michigan
ALEXANDER X. MOONEY, West Virginia   JUAN VARGAS, California
WARREN DAVIDSON, Ohio                CHARLIE CRIST, Florida
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 22, 2017...............................................     1
Appendix:
    March 22, 2017...............................................    27

                               WITNESSES
                       Wednesday, March 22, 2017

Berger, Elana, Social Inclusion and Accountability Program 
  Manager, Bank Information Center...............................    10
Chavkin, Sasha, Reporter, International Consortium of 
  Investigative Journalists......................................     5
Ensminger, Jean, Edie and Lew Wasserman Professor of Social 
  Science, California Institute of Technology....................     6
Morris, Scott A., Senior Fellow, Center for Global Development...     8

                                APPENDIX

Prepared statements:
    Berger, Elana................................................    28
    Chavkin, Sasha...............................................    33
    Ensminger, Jean..............................................    69
    Morris, Scott A..............................................    77

              Additional Material Submitted for the Record

Moore, Hon. Gwen:
    Letter to Dr. Jim Yong Kim, President, World Bank Group, 
      dated July 14, 2016........................................    81
    Written statement of Oxfam America...........................    83
    Memorandum from Admiral James Stavridis to the Secretary of 
      the Treasury, dated July 25, 2011..........................    84
    Memorandum from CDR USTRANSCOM and CDR USCENTCOM to the 
      Secretary of the Treasury, dated May 10, 2010..............    86
Ensminger, Jean:
    Written responses to questions for the record submitted by 
      Representative Barr........................................    87


                         EXAMINING RESULTS AND



                           ACCOUNTABILITY AT



                             THE WORLD BANK

                              ----------                              


                       Wednesday, March 22, 2017

             U.S. House of Representatives,
                           Subcommittee on Monetary
                                  Policy and Trade,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:02 a.m., in 
room 2128, Rayburn House Office Building, Hon. Andy Barr 
[chairman of the subcommittee] presiding.
    Members present: Representatives Barr, Williams, Pittenger, 
Love, Hill, Emmer, Tenney, Hollingsworth; Moore, Sherman, Heck, 
and Vargas.
    Ex officio present: Representatives Hensarling and Waters.
    Chairman Barr. The Subcommittee on Monetary Policy and 
Trade will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time.
    Today's hearing is entitled, ``Examining Results and 
Accountability at the World Bank.''
    I now recognize myself for 5 minutes to give an opening 
statement.
    I welcome members to our hearing today. This year is 
especially important for the World Bank as Congress will be 
considering the 18th replenishment of the International 
Development Association, or IDA, the Bank's lending mechanism 
for the world's poorest countries. Since IDA replenishments 
occur on a 3-year cycle, 2017 is a rare opportunity for 
Congress to discuss appropriate resource levels for the Bank as 
well as any needed reforms.
    As the World Bank's largest shareholder, the United States 
has a leading role in the Bank's governance. If we take that 
role seriously, we must hold the Bank to the highest standards, 
demanding accountability for its projects and ensuring that it 
remains focused on poverty alleviation.
    I am concerned, however, that internal incentives at the 
Bank may prioritize lending over producing real results. Such 
incentives have been criticized for literally decades, yet the 
Bank's own evaluation office has indicated little has changed.
    Let us be clear. No one claims that the Bank's officials 
will always get things right. But its incentives appear 
designed to elevate lending at the expense of learning from 
past mistakes. As the Bank's Independent Evaluation Group, or 
IEG, concluded in a 2014 report, ``This continuing push to lend 
increases the opportunity costs of dedicating time and effort 
to learning and knowledge-sharing and distorts the metrics of 
performance in favor of inputs and short-term outputs rather 
than on results and development solutions.''
    The evaluation office added, ``IEG interviewees indicated 
that senior management should give knowledge the same status as 
lending in management attention, monitoring, and promotion.''
    Well-designed incentives should focus our attention more on 
the lives of Bank beneficiaries, not on loan amounts approved 
by the board. Such incentives will place more value on the 
poors' rights and freedoms without which long-term economic 
growth is unlikely. As Nobel Prize-winning economist Angus 
Deaton has written, ``World Bank officials have long moved on 
to other things by the time the effects of their handiwork 
become visible. There is no responsibility of member-country 
shareholders to the recipients of their aid.''
    Indeed, the Bank's projects in IDA countries have, at 
times, harmed their intended beneficiaries or emboldened 
regimes that are more committed to personal enrichment than 
they are to their citizens' futures.
    Today, we will learn about some of those projects, and how 
their failures, some of which reflect lapses in basic project 
management, can spur improvements at the Bank. Of course, the 
Bank is not new to reform initiatives. Its recent history has 
seen the introduction of matrices, scorecards, frameworks, task 
forces, and other well-intentioned ideas. In the end, however, 
this committee expects to see genuine reform, not the branding 
of reform.
    Such reform will, of course, hinge on the Bank's own 
leadership. I am therefore concerned by reports from within the 
Bank that senior officials may not appreciate what is at stake. 
In the Bank's 2015 employee engagement survey, a mere 38 
percent of respondents indicated that senior management clearly 
communicates strategic priorities, while only 26 percent 
responded that management ``creates a culture of openness and 
trust.'' Only 34 percent of respondents had any confidence that 
the Bank would take action on these findings.
    The Executive Committee of the World Bank's Staff Group 
Association called these results, ``sobering, humbling, 
embarrassing, humiliating, appalling, and a number of other 
adjectives that could be added to the list.''
    If the Bank is to be successful in its goal to eliminate 
poverty, then business as usual is not enough. The World Bank 
may have the best of intentions, but we must call on the Bank 
to deliver results, not simply look for new ways to push money 
out the door.
    In addition, the Bank is involved in a number of countries 
whose economic prospects are key for U.S. security interests. 
If the Bank cannot design and execute projects effectively, 
then not only could the world be less well off, it could be 
less safe.
    I want to thank the witnesses again for testifying today. 
And I look forward to hearing their thoughts on how we can make 
the World Bank more accountable and more results-driven.
    The Chair now recognizes the ranking member of the 
subcommittee, the gentlelady from Wisconsin, Gwen Moore, for 3 
minutes for an opening statement.
    Ms. Moore. Thank you so much, Mr. Chairman. And good 
morning, colleagues.
    I want to welcome our very distinguished panel and thank 
them for their time.
    I do see a familiar face, a former staffer of this 
committee, Mr. Morris. You are proof that there is life after 
Congress and you inspire me.
    Let me jump right into it. The World Bank is the flagship 
development bank in the world. And it is my intention to keep 
it that way. As a matter of fact, as we were going over 
material last night, we saw testimony from former 
Representative John Kasich, now the Governor of Ohio, who was 
the ranking member of the Budget Committee, and spoke 
passionately on behalf of the World Bank.
    I consider myself as well to be a staunch advocate of the 
Bank, its mission, and I do believe that the moral authority 
and the involvement of the United States has led to a safer and 
more just world. And I am also aware of areas where the Bank 
has fallen short.
    I pushed hard to get the best, most comprehensive 
safeguards in place for exactly the reasons that we have seen 
in Uganda. Doing development in economically depressed areas 
means almost by definition that you will operate in areas with 
limited judicial capacity, questionable rule of law, and a 
desire to get the job done that could lead to a certain kind of 
myopia of money. It is why a strong social and moral grounding 
is very critically important.
    I sent a letter with then-Subcommittee Chairman Huizenga--
and without objection, I ask unanimous consent to place it in 
the record--that made quite clear my disgust for what happened 
surrounding the Bank projects in Uganda.
    I have met with the Bank about it since. And I get the 
sense that lessons learned have been lessons applied. Now, we 
have stronger safeguards, and I am happy about that. And I hope 
my Republican colleagues are pleased about that as well.
    In fact, I would love for our private U.S.-based 
institutions to mimic some of the social and environmental 
impacts of projects. I wish that more financial institutions 
were as responsive to this body as the Bank has been. And even 
as we fund the World Bank, we back our banks as taxpayers found 
that we did in 2008 and 2009.
    If there is something that comes out of Uganda at this 
hearing, I hope it is that safeguards are not only important, 
but meticulously observed, even in the difficult position of 
when the pressure to finish the project is on.
    I yield back my 2 seconds.
    Chairman Barr. Thank you. The gentlelady yields back.
    And we will reserve the opportunity for the ranking member 
of the full Financial Services Committee, Ms. Waters, to give a 
2-minute opening statement, but for now, I am going to go ahead 
and introduce the witnesses here.
    First, we welcome the testimony of Mr. Sasha Chavkin, who 
is the lead reporter for the International Consortium of 
Investigative Journalists (ICIJ's) ``Evicted and Abandoned'' 
investigation, which analyzed Bank projects across the world 
and their unintended impact on the poor. He has previously 
written for ProPublica, Columbia Journalism Review, and The New 
York World. Mr. Chavkin has reported from countries including 
Ethiopia, South Sudan, Honduras, and Sri Lanka, and his work 
has been recognized by the Society of Professional Journalists, 
the Society of Environmental Journalists, and the Sidney 
Hillman Foundation.
    Second, Dr. Jean Ensminger is the Edie and Lew Wasserman 
Professor of Social Science at the California Institute of 
Technology, and is a past president of the Society for Economic 
Anthropology. Dr. Ensminger has conducted several decades of 
research on Africa, and her current research focuses on 
corruption in development and decentralized government.
    Third, Mr. Scott Morris is a senior fellow at the Center 
for Global Development, and a director of the U.S. Development 
Policy Initiative. Mr. Morris also served as Deputy Assistant 
Secretary for Development Finance and the Debt at the U.S. 
Treasury Department during the first term of the Obama 
Administration.
    And finally, Ms. Elana Berger is the Child Rights Program 
manager at the Bank Information Center. She is a human rights 
lawyer with significant experience working on education and 
childrens' rights at the international level.
    Each of you will be recognized for 5 minutes to give an 
oral presentation of your testimony.
    But before we turn to our witnesses, I would like to give 
the ranking member of the Full Financial Services Committee, 
the gentlewoman from California, Ms. Waters, an opportunity for 
a 2-minute opening statement. The Chair now recognizes Ranking 
Member Waters for 2 minutes.
    Ms. Waters. Thank you very much.
    I would like to welcome our witnesses here today to discuss 
one of the very important issues within our jurisdiction, which 
is oversight of U.S. participation in the multilateral 
development banks, including the World Bank.
    There is by now widespread agreement that poverty in the 
developing world is one of the major challenges facing the 
world today. While the success of some countries over the past 
50 years has shown that development is possible, the failures 
elsewhere have shown that it is not inevitable.
    I believe that the criticism of the World Bank that you 
will hear today should be understood within a context that also 
recognizes the great deal of progress the Bank has made in many 
areas over the past few decades, in large part due to pressure 
from civil society, from individual governments, from 
parliaments, including the U.S. Congress, and in particular 
from this committee itself.
    Over the years, this committee has successfully insisted 
upon much more transparency and disclosure of information from 
the World Bank. Many years ago, we conditioned U.S. support for 
the Bank on the creation of the Inspection Panel, an 
independent accountability mechanism that would investigate 
allegations by citizens of the Bank's failure to follow its own 
policies and procedures.
    Working in a bipartisan fashion, we successfully pushed for 
debt relief, and then for better and more effective debt relief 
for impoverished countries. We have also pushed for less 
burdensome conditionality and more attention to the social 
dimension that must be present when decisions about development 
assistance are made.
    I welcome both the criticism and the recommendations that 
our witnesses will make today, which, in my view, means that 
you will also be making the case for strong U.S. leadership 
within the Bank, and for more vigorous congressional oversight, 
and for this committee, in particular, to take a more active 
role in helping to shape the development policies that have 
helped make the World Bank the preeminent development 
institution that it has become.
    I would like to thank the Chair, as well as Ms. Moore, for 
all of the work that she has done to help us make sure that we 
give the kind of support to the World Bank that is needed.
    Chairman Barr. Thank you. The gentlelady's time has 
expired.
    Each of the witnesses will now be recognized for 5 minutes 
to give an oral presentation of their testimony. And without 
objection, each of your written statements will be made a part 
of the record.
    Mr. Chavkin, you are now recognized for 5 minutes.

STATEMENT OF SASHA CHAVKIN, REPORTER, INTERNATIONAL CONSORTIUM 
                  OF INVESTIGATIVE JOURNALISTS

    Mr. Chavkin. Chairman Barr, Ranking Member Moore, and 
members of the subcommittee, thank you for inviting me to 
testify about the World Bank.
    I am a reporter for the International Consortium of 
Investigative Journalists, or ICIJ, a nonprofit news 
organization that conducts investigative reporting on global 
issues of public interest. We work through large collaborations 
with media outlets around the world, such as our project last 
year, ``The Panama Papers.''
    I was the lead reporter in a global ICIJ investigation 
entitled, ``Evicted and Abandoned,'' which was published in 
April 2015, and examined forced displacement caused by projects 
financed by the World Bank. Our team included more than 50 
reporters from outlets in 21 countries. We reported on the 
ground in 14 countries in Africa, Asia, and Latin America.
    And we analyzed more than 6,600 World Bank documents that 
tracked what the Bank calls involuntary resettlement associated 
with projects. We found that over a decade, spanning from 2004 
through 2013, projects financed by the World Bank physically or 
economically displaced an estimated 3.4 million people around 
the world. That means that these people either lost their 
homes, their livelihoods were damaged, or they lost some or all 
of their land.
    The figure was drawn from the Bank's own documents tracking 
resettlement and includes projects funded by the IDA and IBRD, 
but not the Bank's business lending arm, the IFC.
    We also found that the Bank regularly failed to follow its 
own safeguards for protecting displaced communities. These 
commitments include resettling communities in equal or better 
conditions than they lived in before, restoring lost 
livelihoods, and avoiding violent evictions.
    We found instead that the Bank repeatedly funded 
governments that not only failed to adequately resettle 
communities, but in some cases were accused of human rights 
abuses such as rape, murder, and violent evictions associated 
with Bank projects. We found in several cases that the World 
Bank continued to bankroll these borrowers even after evidence 
of these abuses came to light.
    One of the most significant cases we examined was the 
Bank's support for a health and education initiative in 
Ethiopia called the Protection of Basic Services Project. We 
investigated allegations that some of this money was diverted 
to an Ethiopian government program called Villagization which 
violently evicted a minority tribe called the Anuak from their 
traditional farmlands which were then turned over to investors.
    I met with Anuak refugees from Ethiopia in a camp in South 
Sudan. I encountered a devoutly Christian community whose 
members described being beaten, raped, and seeing family 
members killed by Ethiopian soldiers who were driving them from 
their land. I also spoke to the former Ethiopian governor who 
was in charge at the time of the evictions, now living in exile 
in the Philippines, who described to me how he personally 
diverted $10 million in World Bank funds to the Villagization 
program.
    Despite the evidence presented by refugees, human rights 
groups, and others, the World Bank refused to acknowledge that 
their funding had supported these evictions. Last year, the 
Bank announced an extension of a similar initiative in Ethiopia 
under a different lending mechanism that now makes it 
impossible for communities to file complaints to the World Bank 
ombudsman.
    There are three findings from our reporting that seem most 
relevant to the work of the committee today. One is that the 
World Bank has serious problems with enforcing its safeguards 
and holding its borrowers accountable for following its rules. 
The second point is that the Bank can be responsive to pressure 
in the form of negative publicity and the influence of donor 
countries, particularly the United States.
    Shortly after ICIJ shared its findings with the Bank, the 
Bank announced a resettlement action plan that boosted funding 
for safeguards enforcement by 15 percent and hired 11 new 
safeguard specialists. The resettlement documents and ombudsman 
report that allowed ICIJ to conduct our investigation existed 
because the Bank had previously adopted an open-records policy 
and created an ombudsman, the Inspection Panel, at the 
insistence of the United States and members of this committee.
    Finally, the failures in safeguard enforcement do not 
negate the fact that the same projects may also have positive 
effects on development. In Ethiopia, for example, the Bank said 
that its investments helped slash child mortality in half in 
less than a decade.
    Thank you.
    [The prepared statement of Mr. Chavkin can be found on page 
33 of the appendix.]
    Chairman Barr. Thank you. The gentleman's time has expired.
    Dr. Jean Ensminger, you are now recognized for 5 minutes.

 STATEMENT OF JEAN ENSMINGER, EDIE AND LEW WASSERMAN PROFESSOR 
     OF SOCIAL SCIENCE, CALIFORNIA INSTITUTE OF TECHNOLOGY

    Ms. Ensminger. Chairman Barr, Ranking Member Moore, and 
distinguished members of the subcommittee, it is an honor to 
have been invited here to testify.
    In 2007, based upon my research experience in Kenya, I 
asked the World Bank to investigate corruption in the Kenya 
Arid Lands Project. INT is the World Bank's integrity vice 
presidency and it has sole responsibility for investigating 
corruption in World Bank projects. In its investigation of 
28,000 financial transactions from the Arid Lands Project, INT 
concluded that 62 percent were suspected fraudulent or 
questionable. The Arid Lands Project was then shut down.
    The Arid Lands case tells us something about the 
effectiveness of routine monitoring systems at the World Bank. 
For 14 years, this project was rated ``satisfactory,'' despite 
the monitoring of the World Bank's task team leader, external 
supervision missions, regular financial management reviews, and 
audits. In 2007, it was even referred to as ``exemplary'' and 
served as a model for a new project.
    Two of Arid Land's biggest problems were lack of 
transparency and excessive staff discretion over the selection 
of project recipients. Control of future funding provided 
leverage to silence beneficiaries who complained about project 
corruption. Most troubling to me is that I see the same 
patterns on the ground today in World Bank projects.
    Recently, a villager asked the regional head of a current 
World Bank project in his area how much money his region was 
budgeted to receive from the project. The head of the project 
refused to tell him. Two weeks ago, I made the same request of 
that project's two World Bank task team leaders. I have 
received no response.
    Fortunately, not all World Bank projects are as poorly 
designed and implemented as Arid Land's. The original 
Indonesian Community-Driven Development Project is deservedly 
often cited as the great success story.
    The Indonesian project was specifically designed to bypass 
the major centers of government corruption. Private firms were 
used to hire many project staff rather than seconding them from 
corrupt government ministries. The tone at the top of the 
project was inspiring and this attracted reform-minded job 
applicants.
    The Indonesian project used a democratic and competitive 
selection process controlled by beneficiaries to allocate 
funds. In striking contrast to the secretive nature of Kenyan 
projects, the Indonesian project also aggressively encouraged 
uncensored media coverage and academic research by third 
parties to shine a spotlight on problems like corruption.
    What the Indonesian case teaches us is that development aid 
can work to better the lives of the poor. But when projects 
don't work well, as was the case with Arid Lands, sanctions are 
necessary. This is where INT comes in. My concern is that INT 
has moved away from intensive forensic audits in favor of a 
concentration on debarment cases.
    Since the Arid Lands forensic audit 5\1/2\ years ago, INT 
has posted 48 investigation reports on its website; 45 of the 
48 are investigations of companies. The vast majority of these 
cases involved one company that was found guilty of fabricating 
documents in order to qualify to bid on a contract.
    Company debarment is important work. The problem is that 
corruption in many World Bank projects is not limited to a few 
rogue contractors. In systemically corrupt countries like 
Kenya, it is common for World Bank projects to be captured by 
the government ministry cartels from which the project staff is 
seconded. Failure to undertake these investigations leaves a 
vast segment of the World Bank's portfolio exposed.
    There is an inherent conflict of interest between the 
mandate of INT to fight corruption and operations' goals to 
keep the money flowing and client states happy. INT is in the 
political crosshairs.
    In my written testimony, I list some specific 
recommendations for reforming INT and transparency policy. The 
first is to move INT's direct report out of operations and over 
to the Audit Committee of the Board of Directors.
    Regarding transparency, while the new disclosure policies 
of 2010 are laudable, they specifically exclude access to 
project financial data. These are precisely the data that 
beneficiaries and third parties need to fight corruption.
    Thank you for your time, and I welcome your questions.
    [The prepared statement of Dr. Ensminger can be found on 
page 69 of the appendix.]
    Chairman Barr. Thank you.
    Mr. Morris, you are recognized for 5 minutes.

STATEMENT OF SCOTT A. MORRIS, SENIOR FELLOW, CENTER FOR GLOBAL 
                          DEVELOPMENT

    Mr. Morris. Chairman Barr, Ranking Member Moore, thank you 
for the opportunity to testify this morning on the World Bank's 
work in low-income countries.
    The World Bank is a leading provider of development 
assistance in the world, working in nearly 150 countries 
globally. But by ``leader,'' I don't just mean that the Bank is 
the largest. The World Bank consistently appears as the most or 
one of the most effective development institutions globally on 
key measures of cost efficiency, project outcomes and policy 
influence.
    These were the findings of aid reviews conducted by 
governments like the U.K., Australia, and the Netherlands; by 
independent organizations like mine; and by an extensive survey 
of developing country leaders conducted by Aid Data, a U.S.-
based research organization.
    This broader context is important for considering questions 
of World Bank reform and instances of project-level failures. I 
would like to briefly address how to think about cases of 
failure in the Bank, three areas of reform I think deserve 
consideration, and finally the degree to which the United 
States can continue to exercise effective oversight in this 
multilateral institution. I elaborate further in each of these 
areas in my written testimony.
    Risk of failure is inherent in the work that the World Bank 
does, particularly operating in difficult environments, whether 
in very poor countries like Uganda, or countries beset by 
conflict like Afghanistan. Zero risk would essentially mean 
zero activity for the institution.
    The key questions are, how does the Bank manage risk and 
promote effectiveness? And how well does it learn from its 
failures when they do occur, as they clearly did in the three 
cases highlighted by the other witnesses this morning?
    The Bank has multiple areas of monitoring and checks aimed 
at promoting effectiveness and guarding against corruption. The 
Bank's investigative arm, the INT, typically finds that 
substantiated cases of fraud and wrongdoing are associated with 
about 3 percent of the Bank's active projects.
    In these cases, the INT office uses measures such as 
debarment of firms, and works with local authorities to pursue 
prosecutions. Separate from the INT, the Bank also has an 
independent complaints mechanism, the Inspection Panel, as we 
heard, with origins in this committee.
    There is broader evidence that the World Bank does learn 
from its failures, but let me point to two examples that 
followed directly from the Uganda case.
    The Bank's Board of Directors just recently approved a $230 
million road project in Bolivia in which risks similar to the 
Uganda project, associated with a large influx of labor, were 
actively identified and mitigated as part of the project 
design.
    More systematically, the Bank has also launched a Gender-
Based Violence Task Force which should, in part, help to 
address a longstanding problem within the institution in the 
sense that lessons learned in one region or sector are overly 
siloed and are not readily taken up in other regions.
    But how can the Bank do better? I offer three ideas aimed 
at promoting effectiveness and guarding against corruption. 
First, greater reliance on results-based mechanisms, like the 
Program for Results. Under the program, the Bank and the 
country agree at the outset on appropriate standards of 
oversight and a set of desired outcomes, such as an increase in 
literacy rates in an education program. And the Bank only 
disburses money if the outcomes are achieved, rather than 
simply disbursing money to pay for project inputs.
    Second, we would have a stronger overall evidence base for 
the Bank's performance if INT had the capacity to conduct 
randomized audits of Bank projects each year, so not just 
responding to signs of corruption, but proactively reviewing a 
random selection of projects.
    Third, the Bank could move more aggressively toward 
adopting new technologies to improve project accountability and 
performance. For example, recognizing the remarkable degree of 
smartphone coverage, even in the poorest countries, the Bank 
could be deploying apps that enable whistleblower-type 
reporting as well as more transparent, community-level rating 
of Bank projects.
    The last point I would like to make relates to the role 
that you play. As the largest cumulative donor to the World 
Bank's IDA since its founding, the United States, and 
particularly the U.S. Congress, has effectively leveraged these 
resources to set policy in the institution. U.S. commitments 
also enable the World Bank to engage effectively in situations 
that are critical to our interests, such as supporting Jordan's 
hosting of a massive influx of refugees from Syria, efforts to 
contain Ebola in West Africa, and just this week a $1.6 billion 
commitment to address unprecedented famine in countries like 
South Sudan and Yemen.
    With recent financial reforms to IDA, every dollar the 
United States contributes now leverages nearly $25 in 
assistance to low-income countries each year. But steering the 
Bank's work requires active engagement, which in turn continues 
to rely on a strong U.S. pledge to IDA and a commitment to 
honoring that pledge.
    Finally, my time is up, but I do want to encourage you as a 
committee to consider participating in some kind of process 
that is looking broadly at our aid toolkit through a formal 
review process, whether a multilateral aid review or one that 
encompasses the bilateral programs, too.
    Thank you.
    [The prepared statement of Mr. Morris can be found on page 
77 of the appendix.]
    Chairman Barr. Thank you, Mr. Morris.
    And now, Ms. Berger, you are now recognized for 5 minutes.

STATEMENT OF ELANA BERGER, SOCIAL INCLUSION AND ACCOUNTABILITY 
            PROGRAM MANAGER, BANK INFORMATION CENTER

    Ms. Berger. Chairman Barr, Ranking Member Moore, thank you 
for inviting me to testify this morning.
    I manage the Social Inclusion and Accountability Program at 
the Bank Information Center, or BIC. BIC is an independent, 
nongovernmental organization that works to ensure that projects 
implemented by multilateral development banks work for the 
communities they are meant to serve. BIC became involved in 
advocacy around the Kamwenge-Kabarole roadway, part of the 
World Bank-funded Uganda Transport Sector Development Project 
in the summer of 2014.
    Joy for Children, a Ugandan civil society organization, 
alerted us to the fact that the project was leading to sexual 
exploitation of young girls along the roadway construction. The 
project had created a boom-town effect, where there was a large 
influx of construction workers into what had been a somewhat 
isolated, rural community. These workers were sexually 
harassing, exploiting, and raping teenage girls. Higher rates 
of teenage pregnancy, HIV/AIDS, and girls dropping out of 
school soon followed.
    The residents had wanted this roadway to be built and 
recognized the significant economic benefits that would result 
from its construction. Even when the project started resulting 
in harm, the residents supported its continuation. They simply 
wanted the harm to their families and communities to be 
addressed.
    Months of attempts to convince the contractor carrying out 
the project to take measures to prevent the harm was fruitless 
as the contractor made clear that they did not see the 
community's problems as their responsibility. Efforts to seek 
assistance from the Ugandan government were similarly 
unsuccessful.
    When the community first brought their concerns around this 
project to the World Bank, the immediate response was denial. 
It was only when the community filed a request with the 
Inspection Panel, the Bank's independent accountability 
mechanism, that the Bank took the communities' concerns 
seriously, ultimately taking the extraordinary step of 
canceling the project.
    However, the significant delay between the community 
raising concerns and the Bank addressing this harm meant that 
there was a 9-month period during which several additional 
girls reportedly became pregnant, dropped out of school, or 
contracted HIV.
    In our experience, it is profound failures at the Bank that 
lead to the most significant reforms. And we are seeing that 
now.
    After the Inspection Panel released its report from the 
investigation, Bank management took the unusual step of putting 
together a document analyzing lessons learned to look at the 
broader institutional failures behind the harm suffered by this 
community.
    In this document, the Bank noted several critical gaps that 
allowed these failures to occur, including the lack of 
expertise within project teams to properly assess, prevent, and 
monitor gender-based violence (GBV), and a failure to 
adequately listen to communities and civil society. To remedy 
these issues, the Bank established a GBV Task Force.
    The World Bank has also used its considerable influence to 
seek reform within the Ugandan government. The Bank has 
provided ongoing capacity-building support to the Uganda 
National Roads Authority, aimed at strengthening its ability to 
monitor and supervise contractors' compliance with 
environmental and social standards and to reduce corruption 
within that agency.
    Going forward, to ensure that the Bank comes out of this 
experience stronger and more able to prevent and respond to 
serious negative impacts from Bank projects, it is absolutely 
essential that the Bank fully implement all of the reforms 
discussed in the lessons-learned document, along with all of 
the recommendations made by the GBV Task Force.
    The Bank must also improve its social assessments to 
identify risks to children and other vulnerable groups who are 
least likely to have a voice in the process.
    Additionally, the Bank must prioritize genuine citizen 
engagement. It must seek out ways to listen more effectively to 
communities and local civil society organizations. The Bank 
must be prepared to swiftly address reports of sexual abuse, 
involving trained experts in any investigation.
    In closing, we would like to note that throughout the 
Bank's history, the U.S. Government has been a critical leader 
in reforming the institution, which has led to lasting changes 
across the development finance landscape. In this case 
specifically, the U.S. Government played a leadership role at 
the World Bank Board to encourage broad institutional reforms 
aimed at preventing similar failures in the future.
    Today, continued U.S. leadership is needed to ensure that 
proposed reforms are implemented. We appreciate the committee's 
interest in this case, and we look forward to working together 
to advance reform at the World Bank.
    [The prepared statement of Ms. Berger can be found on page 
28 of the appendix.]
    Chairman Barr. Thank you to all the witnesses for your 
testimony and your recommendations on how to reform and improve 
the operations at the World Bank.
    The Chair now recognizes himself for 5 minutes.
    In the past, we have seen U.S. national security officials 
make a case for the multilateral development banks, arguing 
that economic support for our allies serves key interests. 
Given the downsides to some of the Bank's assistance that we 
have heard about from our witnesses here today, I wanted to ask 
our panel, particularly Mr. Morris, what effect does support 
for oppressive regimes have on our national security interests? 
Are we resigned to working with governments that may help us in 
the short term, but whose long-term impact on their citizens 
creates potential security risks further down the road? What 
are the tradeoffs here?
    Mr. Morris. Thank you, Mr. Chairman. I think it is really 
an important question and points to the underlying challenges 
that an institution like the Bank actually faces, and 
particularly working on behalf of the interests of the United 
States as its largest shareholder. The Bank is engaged in some 
very difficult environments with client-country governments 
that, in some instances, would not meet our standards of 
democracy and freedom.
    But it is also in those very instances where the United 
States is pushing the Bank to be engaged because it is often 
situations where we have troops on the ground and we need the 
Bank there doing things like road projects that are directly 
supporting our efforts.
    But you are right, there is a broader challenge of the 
sustainability of that kind of engagement if we don't have a 
credible client-country government partner. And this is just an 
ongoing challenge. I think in some instances, the United States 
has been very good at pushing the Bank to pull back in the face 
of clear problems of governance. But frankly, in other 
situations where we have direct strategic interests, we may be 
pushing in the other direction.
    Chairman Barr. Thank you.
    And for the other three witnesses, I wonder if we could 
make or should make the link between the Bank's activities and 
national security more explicit. For instance, if the World 
Bank takes on the issue of refugees, what should the Bank be 
doing to prevent extremism or radicalization within those 
communities? Alternatively, should the Bank refocus some of its 
lending to regions and countries where extremism, radical Islam 
is a particular problem?
    Would any of the other witnesses care to chime in on that?
    Mr. Chavkin. Thank you, Mr. Chairman. I think that what the 
Bank needs is more of an ability and willingness to walk away 
from the table when serious abuses are occurring. I am not a 
national security expert, but what I can say is that there have 
been a number of cases in recent years where there have been 
repeated, credible claims and evidence that has emerged of 
governments and companies that have received support from the 
World Bank group engaged in human rights abuses or corruption. 
And that cases like the project in Uganda where the Bank pulls 
back are vaninshingly rare.
    And obviously, lending is an important source of leverage 
for the United States as well. But it seems that often, as you 
mentioned before, the desire to lend tends to outweigh an 
ability to draw a firm line when it comes to governments and 
companies using Bank projects to commit abuses.
    Chairman Barr. And Dr. Ensminger and Ms. Berger, when you 
answer this question, when the World Bank works with a 
government or an education system within the government, if the 
goal of the World Bank is alleviation of poverty and economic 
growth, what responsibility does the Bank have to work with 
education systems to undermine ideologies that are incompatible 
with freedom and growth?
    Ms. Ensminger. I don't have a ready answer to that 
question, but I can address your previous question. Would that 
be all right?
    Chairman Barr. Okay, sure.
    Ms. Ensminger. I think you hit the nail on the head 
regarding long-term interests versus short-term interests 
regarding national security issues. And it speaks directly to 
when and whether we cut off a country. It also speaks directly 
to corruption.
    In the case of Kenya, for example, we cooperate a great 
deal with Kenya on national security issues regarding fighting 
Al-Shabaab across the border in Somalia. So it is in our short-
term interests to cooperate with Kenya. How much license will 
we give them in terms of corruption and other abuses before we 
are in a position to cut that country off? We have undermined 
our own bargaining power on those issues.
    Chairman Barr. And my time has expired. Thank you for your 
answers.
    The Chair now recognizes the ranking member of the 
subcommittee, Ms. Moore, for 5 minutes.
    Ms. Moore. Thank you so much, Mr. Chairman.
    And I have really learned a lot and really appreciated all 
of your testimony here.
    One of the things I really find to be very, very 
frightening to think about is these young women and young girls 
who have been raped and taken advantage of in these countries. 
When I talked with the World Bank, it is so pathetic to think 
about some of these Ugandan girls--one of these workers would 
give them 15,000 shillings, worth about $3, and a 14-year-old 
saw that as evidence that they loved them and cared for them.
    I guess one of the things that I want to get clear before I 
ask some more questions is, I heard correctly, didn't I, that 
there is nobody on this panel who thinks that the World Bank is 
not important to engage, that they continue to support the 
United States paying their dues and being engaged and involved 
in the World Bank? Am I clear on that, that there is no one who 
thinks we need to just bow out?
    Mr. Chavkin. As a reporter, I am not here to make policy 
recommendations.
    Ms. Moore. Okay, I understand.
    Mr. Chavkin. But certainly, none of our findings suggested 
that United States contributions and engagement were a part of 
the problem.
    Ms. Moore. Okay, thank you.
    Ms. Berger. And in our case, we found that U.S. engagement 
actually was incredibly important to gaining redress for these 
girls.
    Ms. Moore. Right.
    Ms. Berger. In fact, the U.S. executive director would go 
into meetings with Bank staffers bringing representatives of 
other U.S. agencies like USAID and the State Department. And 
because the United States was the only board Chair to do that, 
the United States was able to ask the Bank very specific, 
nitty-gritty questions about how the Bank was redressing the 
harm to these girls, and the United States was able to put 
pressure on the Bank to remediate this harm in ways that other 
governments did not do. So I think the U.S. contribution and 
the U.S. leadership was critical there.
    Ms. Moore. Thank you.
    Since we talked about counterterrorism, I guess I want to 
talk a little bit about, not only is it my understanding from 
all of your testimony that not only was it the corruption of 
these countrys' governments sometimes or the fact that the 
governments would not necessarily address the problems, but it 
was also a problem of the contractors. In the case of Uganda, 
it was a Chinese contractor who did not do their due diligence.
    So I ask this question or maybe just to make a statement: 
We have just this session, through the Congressional Review 
Act, eliminated Section 1504 of the Dodd-Frank Act, which 
requires that there be oversight over extractive industries 
where American companies are going in, taking the oil and 
minerals and stuff out of the country, that they disclose these 
contracts and relationships. And so the potential for 
corruption will be spawned by this.
    Mr. Morris, do you have an opinion on this?
    Mr. Morris. Sure, Ms. Moore, thank you for that. I would 
say that one of the mandates of the Bank is, as an institution, 
to be pressing for transparency in the work that it does and as 
providing sunlight in these situations, that it does guard 
against corruption.
    If I can make two quick points related to the issues you 
raised, on the Uganda case, it is also, I think, worth stepping 
back and recognizing if you don't have the World Bank or 
institutions like it making the direct connections between road 
projects being associated with the terrible failings we saw in 
this case, it is not clear to me that other sources for 
financing these projects will do that. I think it is a mandate 
for the Bank to make those connections in ways that--
    Ms. Moore. Reclaiming my time, with others, like the 
Chinese Development Bank and some of the other banks around the 
world, there won't necessarily be that accountability and 
transparency. They will just pick up the slack if we were to 
disengage.
    I'm sorry, Mr. Morris, you can continue.
    Mr. Morris. Yes, that is absolutely correct. And I think 
that is also the broader perspective on the financing landscape 
is that it is no secret that in Sub-Saharan Africa in 
particular, Chinese financing has become dominant in--
    Ms. Moore. Reclaiming my time, Mr. Chairman, I would like 
to put three things in the record, without objection: an Ex-Im 
statement for the record; the letter that I referred to with 
former Chairman Huizenga; and a third statement from--what did 
I do with it?
    Chairman Barr. Without objection, it is so ordered.
    Ms. Moore. Without objection, those three things will be 
placed in the record, as soon as I find the third one.
    Chairman Barr. Very good, without objection, those will be 
placed in the record.
    And the Chair now recognizes the vice chairman of the 
subcommittee, the gentleman from Texas, Mr. Williams.
    Mr. Williams. Thank you, Mr. Chairman.
    At a hearing last Congress, one of our witnesses, Dr. 
Martin Ravallion from the Center for Global Development, and a 
former long-time staff member at the World Bank, told us that, 
``The reality is, bank staffs are assessed by the volume of 
their lending, dollars of money lent. And that is just a poor 
indicator of impact on poverty. You have impact on poverty 
sometimes when you don't lend at all.''
    Dr. Ravallion echoed an argument that has been made at the 
Bank for decades. Moreover, a recent report by the World Bank's 
Independent Evaluation Group confirmed that even after all 
these years, the pressure to lend that is felt by staff 
inhibits learning and takes the focus off development outcomes.
    So, Mr. Chavkin, I would ask you this question: What has 
been your experience with the World Bank staff's commitment to 
project results? And is that a high priority for them, do you 
think?
    Mr. Chavkin. I am not in a position to speak to whether 
projects delivered on development goals.
    Mr. Williams. All right.
    Mr. Chavkin. If it is helpful, what I can say is that I 
believe the pressure to lend has been an important factor in 
failure to follow safeguards. For example, for quite a while, 
there was actually a system in which safeguards officers would 
be reporting to project managers whose responsibility was to 
get loans approved. The Bank has now improved that system to 
some degree in providing greater budgetary and organizational 
independence to its safeguards officers.
    Mr. Williams. Okay, thank you.
    Ms. Ensminger, is effective management important to staff, 
do you think? And do they already have the tools to preempt 
some of the failures we have heard about today, or are they 
simply in over their heads?
    Ms. Ensminger. There is tremendous pressure to push money 
out the door. It has been talked about for decades. It has not 
been adequately resolved. There are many wonderful team task 
leaders (TTLs), in the Bank who would like to do their job 
better. Because of the pressure to move money out the door so 
quickly, they are stinting on design elements, not out of 
desire, but because of the pressures on their time, and 
cutbacks on their budgets. They are not capable of doing 
adequate supervision.
    For the same reasons, we see a conflict of interest 
regarding aggressive measures on corruption as well as 
operations interference on INT investigations.
    Mr. Williams. Thank you.
    Ms. Berger, what more could the Bank do to incentivize its 
staff, in your opinion, to care about these elements of a 
project? How can the United States change the Bank's culture?
    Ms. Berger. One of the things that the United States has 
already done is, in the lessons-learned document that the Bank 
put together after this project, it talks about the staffing 
issue. And it said that there was a need for social and 
environmental safeguard specialists to be involved in the 
project throughout the project cycle. And this is something the 
United States really pushed for in that document.
    Because if you have those social specialists involved, not 
only during the project design, but also during the project's 
implementation and the monitoring and supervision phase, you 
have someone with the training to pick up on potential problems 
like the ones experienced by the girls in this case. And as 
soon as they see risk factors for sexual exploitation, they can 
put in place measures to prevent that.
    Mr. Williams. Thank you.
    Mr. Morris, why has the critique of Bank incentives endured 
for so many years, in your opinion? Why can't the Bank get it 
right when even the staff knows incentives are misaligned?
    Mr. Morris. I think the pressure to lend is a real issue. 
And the critique over the years is genuine. On the other hand, 
it is a bank, and its core model is to lend, so that is going 
to be with us absent some fundamental restructuring of the 
institution.
    The chairman mentioned the views of Angus Deaton in his 
opening remarks, and I think Professor Deaton offers a 
thoughtful critique, that one of the challenges of being overly 
reliant on lending is it does crowd out other types of 
activities, doing long-term research and development work. So I 
think there are ways in which structurally, the Bank could be 
shifted toward a wider range of activities, which would also 
have the effect of dampening some of the negative incentives 
around lending.
    Mr. Williams. Okay, quickly, also to you, what would the 
Bank have to do to shift staff incentives toward project 
results and knowledge generation?
    Mr. Morris. I think the Bank has frankly made a lot of 
progress in this way. I think we do see much more emphasis on 
actual project outcomes, not just success being defined by 
closing the deal. Certainly, there is always more progress that 
could be made in that area. But I do think we see a more 
outcomes-oriented institution today than what we saw, say, 20 
years ago.
    Mr. Williams. Okay, thank you for your answers.
    Mr. Chairman, I yield back.
    Chairman Barr. The gentleman yields back.
    And now the Chair recognizes the gentleman from Washington, 
Mr. Heck.
    Mr. Heck. Thank you, Mr. Chairman.
    For anyone on the panel who knows the answer to this 
question, is there a more current rating of the quality of 
official development assessment of the IDA since the one for 
2014 in which the IDA was found to rank in the top 10 of all 4 
of the metrics of effectiveness and quality?
    Mr. Morris. Congressman, I will answer that, because 
actually that work was done by my colleague at the Center for 
Global Development, Nancy Birdsall, along with colleagues at 
the Brookings Institution. That is the most current rating that 
was done through the so-called QuODA exercise. And as I said in 
my statement, it is consistent with other kinds of reviews 
which attempt to compare institutions like the World Bank to 
other development institutions. And it is frankly remarkable 
how consistently the World Bank appears at the top or among the 
top in those kinds of ratings.
    Mr. Heck. Perhaps for you as well, Mr. Morris, one of the 
concerns about the IDA that has been expressed is whether or 
not its role is duplicative in the broader scheme. And I am 
wondering if you would characterize any way in which the IDA is 
unique in terms of how it contributes to World Bank mission and 
that of its corollary partners?
    Mr. Morris. Certainly from a U.S. perspective, I think--
    Mr. Heck. Aside from--pardon the interruption, sir--obvious 
quality, given the ranking of the assessment, is there any way 
in which it is unique?
    Mr. Morris. Sure. And beyond quality, I think for the 
United States it is hugely complementary actually to our own 
toolkit. If you look at our bilateral programs, which are 
almost exclusively grant allocations in areas like humanitarian 
assistance and global health, what IDA does, again, is lending-
based, much more focused on big infrastructure projects. So in 
that way, it is, as an extension of our own assistance tool 
kit, a great complement.
    And in the face of actors like China, which through their 
bilateral programs are doing massive amounts of infrastructure 
investment, I think it is important from a U.S. perspective to 
see the value in IDA's work in this broader approach to 
economic development.
    Mr. Heck. Mr. Morris, is it generally the case, as I have 
been led to believe, that when China engages in bilateral 
development ``aid,'' there are often conditions with respect to 
continuing economic relationships and concessions given to 
China with respect to, for example, access to mineral resources 
and the like?
    Mr. Morris. Congressman, one of the challenges of 
evaluating China's investments is that there is not a lot of 
transparency in the relationships.
    Mr. Heck. What is your impression?
    Mr. Morris. My impression is that the Chinese themselves 
would not characterize most of these flows as aid. They are 
doing it for their own direct economic interests, commercial 
interests. And so I think that certainly affects the kinds of 
agreements that they strike, both in terms of the sectors they 
are investing in, and the kinds of concessions that they would 
get. I think that is a reality of it.
    I think it still comes with some benefit for these 
countries, but it certainly raises concerns of the type to 
which I think you are alluding.
    Mr. Heck. And so, in effect, in the effort to cultivate 
good relationships, which indirectly if not directly contribute 
to our security, we come to the world stage offering these 
loans in a transparent way and without conditions, but are in 
very real competition with China which seeks to extend its 
influence as well. Is that an accurate reflection?
    Mr. Morris. Congressman, I think that is correct. I would 
say on the question of conditions, I think to the degree that 
the World Bank does attach conditions in its engagements, they 
are broadly aimed at an effective relationship. They are 
certainly not about creating advantages for any one country.
    Mr. Heck. Quickly, in my limited time left, I could not 
find it in the material, are you familiar with the default rate 
of the IDA, what the default rate of the IDA is and how that 
compares to its peers?
    Mr. Morris. As a general matter, countries do not default 
on the World Bank. And there is the issue that the Bank has so-
called preferred creditor status. It is not in the interests of 
any country to default. There have been countries that have 
been suspended from Bank assistance because they are in 
arrears. But over the long term, countries pay back their 
money, which is evidenced by the AAA rating that the Bank has.
    Mr. Heck. I yield back the time I no longer have available, 
with gratitude for your answer and for the Chair's indulgence.
    Chairman Barr. Thank you. The gentleman's time has expired.
    And now, the Chair recognizes the gentleman from Indiana, 
Mr. Hollingsworth.
    Mr. Hollingsworth. Good morning. I am glad that all of you 
came out today and I really appreciate your testimony this 
morning.
    My question is really about mission creep and better 
understanding about what we believe the mission of the World 
Bank to be specifically and to what extent we think they are 
serving that specific mission.
    It is my understanding that the genesis of the World Bank 
was really to help countries who couldn't access international 
credit markets to develop in a manner that would enable them to 
do so.
    Certainly, that has changed over time, but something that 
my constituents continue to worry about, not only with this 
institution, but with institutions more broadly, is that we are 
continuing to develop an approach where we try to be all things 
to all people in all places and we end up not doing any of them 
exceptionally well.
    To what extent do each of you think that perhaps an overly 
broad mission focused on middle-income countries as well as 
extreme poverty in low-income countries, focused on health as 
well as development and infrastructure, has led to some of 
these failures, and a more specific mission and a clear-cut 
mission would enable them to do better at what we want them to 
do?
    Left to right.
    Mr. Chavkin. Thank you. I am not really in a position to 
comment, particularly if we are looking at IDA replenishment. 
The performance of IDA seems separate in some ways from the 
performance of IBRD, which is the middle-income lending arm of 
the Bank.
    I am going to leave it at that.
    Ms. Ensminger. I will speak again just directly to my 
experience with IDA and particularly in Kenya, which I suspect 
is very typical of other African countries. The problem as I 
see it is not with mission creep, but the way in which the 
mission is accomplished. So I am not seeing a problem 
specifically in the IDA funds that have targeted Kenya, but 
this may also be a function of my limited experience with some 
of the other area's infrastructure projects, for example.
    But from my own perspective, I would not put that down as 
the number-one problem.
    Mr. Morris. Congressman, look, I think you are absolutely 
right. Certainly, defining the origins of the Bank, the 
evolution, and then pointing to this as a potential challenge 
of the Bank trying to do too many things in too many places. 
But I would point out, in the full range of countries, look at 
a country like India where, number one, the remarkable progress 
globally in poverty reduction and then where we want to be 
going forward, you really have to bet on India's success to 
achieve what we want to achieve when it comes to eliminating 
extreme poverty.
    The Bank is a hugely important partner to India and what 
the Bank is doing, which I think is entirely appropriate, is 
not to say you no longer are eligible for IDA, therefore we are 
done with you, but to shifting the nature of assistance so that 
it is better leveraged, it is more cost-efficient for countries 
like the United States that are putting money in.
    So the relationship evolves, but the engagement is still 
critical, I think, from our perspective of what we have in 
terms of goals around the world.
    Ms. Berger. When we talk about Uganda, I think the thing to 
keep in mind is sort of the ``but for.'' What if the World Bank 
hadn't been involved, right? Is the World Bank's involvement in 
Uganda looking towards reducing poverty constructive? And I 
think in this case, it really was, because the community really 
saw this roadway as their way to reduce poverty by allowing 
them to access markets, and sell their goods.
    And so, that roadway was critical. And the World Bank's 
involvement in that roadway was particularly important because 
it was through the World Bank that the community was able to 
get redress for their harms and was able to get changes made to 
the project so that it was more responsive to the needs of the 
community.
    And I think absent that, if the road was being built 
without the World Bank, you simply would have had the road, but 
nobody would ever have addressed these sort of negative 
repercussions, which means you wouldn't have achieved the aim 
of reducing poverty because while you would have that access to 
markets, you would also have all of these families with--
teenage mothers who weren't able to finish school and all of 
these negative impacts that kept people in poverty.
    Mr. Hollingsworth. All right, thank you.
    I yield back the rest of my time.
    Chairman Barr. Thank you.
    Mr. Chavkin offered to introduce into the record three 
articles, and without objection, those articles will be 
submitted for the record.
    The Chair now recognizes the distinguished ranking member 
of the full Financial Services Committee, Ms. Waters from 
California.
    Ms. Waters. Thank you very much, Mr. Chairman.
    And again, I would like to thank our witnesses for being 
here today.
    As you know, when we hear some of the kinds of problems 
that you have identified here today, it is disturbing. And we 
don't feel good about it. But we really do feel good about the 
fact that we are major players in these bilateral institutions 
and that this country is doing its part in the world to deal 
with poverty, and that we must do everything that we can to 
support these projects. We must do everything that we can to 
make sure they are operating in the way that they are supposed 
to be operating.
    And I see that the World Bank in many instances has taken 
steps to deal with some of these problems. I want to know about 
the Bank's report entitled, ``Lessons Learned and Agenda for 
Action,'' which examined the issues and massive failures that 
arose from the Uganda project. So did they issue a report of 
some kind entitled, ``Lessons Learned and Agenda for Action?''
    Ms. Berger. Yes, absolutely. And this was a unique thing 
that the Bank did in the Uganda case, recognizing those 
failures.
    The Bank always issues an action plan after an Inspection 
Panel case. That action plan, though, only addresses the harm 
to a particular community. What is unique about this lessons-
learned document is it looks at failures across the institution 
and the ways to remedy those failures.
    And as I mentioned a moment ago, the U.S. Government, the 
U.S. executive director's office at the Bank played a really 
important role in strengthening that document so that the 
recommendations for reform really hit at the issues that caused 
problems in this project.
    Ms. Waters. I am very, very pleased to hear that. And I 
must share with my colleagues that I have visited Uganda and it 
was for something different, we were looking at HIV and AIDS, 
and I was so impressed with the will and the desire of people 
in that country, despite the lack of resources and the poverty, 
to get something done and to deal with that issue, a lot of 
determination by folks who have very little. And so, I 
certainly want us to continue to give support to these poor 
countries to help eliminate poverty.
    And I would like to also ask, what do you think--I don't 
know how many participating countries visit these projects. 
What good does that do? And should we take a look at visiting 
more, showing up so people know that we are interested, that we 
care about what is going on? What do you think about that?
    Mr. Chavkin. I would like to say that showing up and seeing 
what is happening on the ground is one of the most valuable 
contributions that I believe that the committee and others 
overseeing the Bank could make.
    In reference to the Uganda report, as well as the 
resettlement plan, I think what they show is that the Bank has 
the capacity, when it wishes, to address some of these systemic 
problems that arise.
    In the case of the Bank's failures in enforcing its 
resettlement policies, what we found, however, was that the 
Bank had actually been looking into this for years and it had 
issued internal reports. Those reports had essentially sat 
buried until we began investigating and asking questions about 
them.
    And so what I think the issue for the Bank is, why does it 
take a Uganda project or an Ethiopia project or a report in the 
press for these reforms to be enacted? And I think that one way 
to encourage the Bank to be more proactive and more forthright 
about addressing the problems with its oversight would be going 
to the ground and seeing what is happening for yourselves.
    Ms. Waters. Thank you very much.
    And I would like to say to Mr. Barr and to Ms. Moore, I 
think that is a challenge for us to get on the ground and take 
a look.
    Do you think that is a good idea, Ms. Berger?
    Ms. Berger. Definitely. I think going and seeing the 
context where a project is happening really helps you to 
understand the problems faced by the community and the ways to 
address them.
    Ms. Waters. Thank you all so very much.
    I yield back the balance of my time.
    Chairman Barr. Thank you. The gentlelady yields back.
    The Chair now recognizes the gentleman from Arkansas, Mr. 
Hill.
    Mr. Hill. I thank the chairman and the ranking member for 
hosting this hearing today.
    I appreciate the witnesses being here to talk about an 
important subject, not only to global development, but also to 
American taxpayers.
    I have some experience in my past government service of 
working with USAID on the design of technical assistance in 
foreign countries, so I have some personal understanding of the 
challenges that come in working abroad and designing things 
that work on the ground. And I also just returned from a trip 
to the Republic of Congo where the systematic spreading of 
concrete by the Chinese government across the whole country of 
Congo was quite evident.
    But the issue of corruption was discussed there as well, so 
I really appreciate the witnesses today talking about the World 
Bank and its work around the world.
    The first question I have is, when we look at the fact that 
the United States has a little larger percentage, contribution, 
and ownership in the European Bank and in the Inter-American 
Bank, are we more effective at guiding policy there versus the 
World Bank? I would be interested in views on that.
    Mr. Morris. Congressman, I will take a stab at that, and I 
should note in answering that I served in the prior 
Administration representing the United States across these 
institutions. I guess my judgment would be that shareholding is 
an important measure of our influence, but it is not the whole 
picture. And I think we have different degrees of influence 
within the different institutions.
    And frankly, I think the World Bank, for reasons of long 
history, for reasons of the fact that they reside here in 
Washington, as many people noted, that the Bank has always had 
an American president, I think it is pretty well understood 
that the United States has a high degree of influence within 
that institution, even though its membership is much broader 
and our actual shareholding, as you said, is significantly 
smaller than at the Inter-American Development Bank.
    Mr. Hill. In that regard, I would like your views, Mr. 
Morris and Dr. Ensminger, on--in your testimony, Dr. Ensminger, 
you say, ``Neither Congress nor the USED's office have the 
power to micromanage the World Bank's policies. Changes of the 
sort I am suggesting would require significant commitment and a 
great deal of sustained U.S. leadership to win support of a 
majority of sympathetic board members.''
    So how are we, as Members of Congress, who allocate the 
resources to contribute to these multilateral institutions, 
supposed to enhance the sustained U.S. leadership to get those 
sorts of changes?
    Dr. Ensminger, this is your testimony, so I will let you 
start on that.
    Ms. Ensminger. As I understand it, you do have leverage 
over the Treasury and the Treasury has leverage over the USED's 
office. You also have an American president, an American-
appointed president, who has recently demoted the reporting 
status of the vice president for INT. I don't understand the 
reasoning behind that. I think it sends a very bad message. And 
as I have suggested in my testimony, I think there is undo 
influence on the part of operations over INT's investigations.
    I experienced this firsthand in the Arid Lands 
investigation. And I might also add, although it is not 
directly relevant on this point, I have not been impressed with 
the follow-through and the lessons learned from the Arid Lands 
case, in contrast to what is obviously a very different picture 
here in other arenas.
    Corruption continues to be a huge problem. And I think the 
role of INT is also continuing to be perhaps moving in the 
wrong direction. So I would hope that you can exercise extreme 
leverage on that issue because I think it is extremely 
important.
    Mr. Hill. Mr. Morris?
    Mr. Morris. Congressman, I would just encourage you both to 
be directly engaged with senior management of the Bank and 
through senior U.S. Treasury officials. I think both are really 
important channels of influence that you have.
    And I want to correct slightly, because I think it is often 
mischaracterized that the United States is not in a position to 
appoint the president of the Bank. The United States nominates 
a candidate to be president of the World Bank. Through an 
election process, the outcome has consistently been the 
American candidate.
    Mr. Hill. I think we need to use that leverage to the best 
of our ability. And it is really hard for Members of Congress 
on both sides of the aisle to justify continued U.S. financial 
commitment to institutions that have such a poor track record 
in many ways, even though they do good around the world. There 
is no doubt, I am not excusing the good that they do. Because 
in facing a $20 trillion debt, we have a lot of pressure on us 
to make sure that taxpayer resources are spent wisely and that 
we get the best bang for our buck.
    I yield back. Thank you, Mr. Chairman.
    Chairman Barr. Thank you. The gentleman yields back.
    And the Chair now recognizes the gentleman from North 
Carolina, Mr. Pittenger.
    Mr. Pittenger. Thank you, Mr. Chairman.
    And I thank each of you for your dedication and work in 
this important area.
    And in the spirit of Congressman Hill's comments and 
questions, I would like to ask further, as we are all aware, 
the multilateral development banks are sitting on enormous 
equity from loan repayments to the tune of hundreds of billions 
of dollars. And these loans were made initially from 
appropriations by the Congress.
    Do these MDB shareholders have a claim to that equity? And 
if so, if the loans are repaid back to the banks, should the 
proceeds go back to the Treasury, especially where the United 
States does have this $20 trillion debt?
    Mr. Morris. Congressman, the United States as a shareholder 
does hold equity in the institution. Frankly, one of the things 
that has enabled the World Bank to be effective over many years 
and has lessened the burden on U.S. contributions over the 
years is that the Bank can retain that equity, that the 
proceeds on loans have actually allowed it to grow without 
coming back and asking for more capital on a routine basis.
    Mr. Pittenger. Yes, sir, I respect that. Then if that is 
true, why should Congress keep appropriating additional 
dollars?
    Mr. Morris. That is a fair question. So it is important to 
recognize there are different channels of financing within the 
institution. The so-called IDA is the arm of the Bank that is 
serving the very poorest countries. Because it is serving the 
poorest countries, the lending that it does is highly 
subsidized. That subsidy is something that over the years 
donors to the Bank, with the United States really in the lead, 
I would say, they agree every 3 years to provide that.
    I think it is important. And we are talking about $1.3 
billion a year from the United States. I would never say that 
is an insignificant amount of money.
    Mr. Pittenger. No, sir, it is not.
    Mr. Morris. It is real money. On the other hand, let us put 
it in context. In terms of even the overall foreign assistance 
budget we have of roughly $30 billion a year, I think that $1.3 
actually gets us quite a lot in actual IDA programming.
    Mr. Pittenger. I understand that, sir. And if anyone else 
wants to chime in, they can. But in context then, let us view 
the Pan African Union. Many of these countries are members of 
the Pan African Union. I have many ambassadors who come into my 
office and tell me of the pressure that they have to vote 
against the interests of the United States in the U.N. and our 
interests.
    How do you bring that into clear focus in terms of our 
American interests? I appreciate the work that we can do for 
the needs throughout the world. And I am very sensitive to 
that. I have traveled extensively back for 40 years when I 
served with a Christian organization and spent a lot of time in 
Africa. So I am not unaware of the concerns.
    But I do in this job have a responsibility to the American 
people and the American taxpayer. And in that regard, how do 
you balance that when time and again, year after year, decade 
after decade, the Pan African Union as a whole votes against us 
on a pretty consistent basis in the United Nations?
    Anyone who would like to respond to that. I don't blame 
you. I wouldn't--
    Mr. Morris. Congressman, if you don't mind, I will come in 
again. But I would say that it is important to look at each of 
these countries, and for the United States, its relationship 
directly with each of the countries.
    You are absolutely right. There will be cases where the 
World Bank is engaging in countries where we have real 
concerns. I would say even in those situations, I think there 
is some value in the work that the World Bank is doing without 
us being directly associated with it, that over the longer 
term, it is the channel for U.S. influence, particularly if 
they find ways to do effective projects.
    Mr. Pittenger. Reclaiming my time, I do think, though, we 
have a responsibility to this sovereign country to preserve our 
interests and to make sure that assets that we participate with 
work in our behalf. And the U.N. certainly has not been a 
friend of our country for a long time. And the Pan African 
Union has certainly been part of that.
    I would like to ask Mr. Chavkin, if I could, do you see any 
oversight process that we could have to prevent and deter some 
of the human rights issues that you convey today? What more 
could be done and how should that fit into our worldview of the 
World Bank?
    Mr. Chavkin. I would point to two areas. One is to ensure 
closer scrutiny of individual projects as voted on by the 
United States executive director. Often, when the United States 
executive director has concerns, they will abstain from a vote.
    Chairman Barr. The gentleman's time has expired.
    I will let you just finish your thought really quickly.
    Mr. Chavkin. Okay, thank you. And the second is to ensure 
independent oversight structures within the World Bank, both 
safeguards specialists, and the Inspection Panel remaining 
independent and having direct lines to Bank management without 
being forced to go through operations or task team leaders and 
projects.
    Chairman Barr. Thank you.
    Mr. Pittenger. Thank you, sir. My time has expired.
    Chairman Barr. Thank you. The gentleman's time has expired.
    The Chair recognizes the gentleman from California, Mr. 
Sherman.
    Mr. Sherman. One of the most important things America does 
with our tax money is our foreign aid program, and particularly 
in the new Administration we have to make sure that those 
dollars, which will become even more scarce, are spent in the 
most effective way. Those claiming that the World Bank is the 
most effective way always argue for the multiplier effect, 
``Hey, we put in a dollar and three other dollars, four other 
dollars from other countries come in.''
    Of course, other foreign aid programs also have a 
multiplier effect. If we announce that we will spend another 
billion dollars on malaria relief and eradication, I believe we 
could cajole other wealthy countries to put in similar amounts, 
perhaps just as great a multiplier effect.
    So putting aside the multiplier effect or understanding 
that all of our foreign aid can be used to generate a 
multiplier effect, I wonder if the witnesses can identify any 
better use of our foreign aid dollars than a contribution to 
the World Bank.
    I will go through the--yes, go ahead?
    Ms. Ensminger. Not exactly an answer to your question, but 
I want to raise the issue--
    Mr. Sherman. I have a limited amount of time. If somebody 
doesn't have an answer to my question, I will move on to 
another question.
    Ms. Ensminger. It is related to your question, but it has 
to do with the research department at the Bank, which I believe 
is one of the finest research departments in development 
economics.
    Mr. Sherman. But how do we weight contributing to the Bank 
as opposed to health programs dealing with malaria? We could 
put more in the Bank. Does anybody have a comparison?
    Ms. Ensminger. It is directly relevant to that.
    Mr. Sherman. Mr. Morris? But I have to go on to another 
question.
    Mr. Morris. Yes, Congressman, I think you are--there is a 
question of tradeoffs and it is a concern right now in the 
foreign assistance budget broadly is under attack in what we 
saw coming from the Administration. I think it is important to 
recognize we have a diverse toolkit. All of the parts of our 
foreign assistance--
    Mr. Sherman. I know we have a diverse toolkit.
    Mr. Morris. The other thing I would say is--
    Mr. Sherman. I am going to reclaim my time because I want 
to go on to--
    Mr. Morris. The World Bank is hugely important--
    Mr. Sherman. Mr. Morris, I am going to reclaim my time. 
Because, as the gentleman from North Carolina pointed out, one 
of the disadvantages of dealing with the Bank is that we don't 
get to pick which countries get the money. Now, he is concerned 
with countries that vote against us in the U.N. I am concerned 
with countries that are developing nuclear weapons for the 
purpose of destroying millions of Americans' lives.
    I have been working on these issues for 20 years. And in 
2002, we were told here in Congress that loans would not be 
made to Iran, and then they were. And then we were told it 
wouldn't be happening again, and then it happened again. And we 
were told that the United States had the veto power to prevent 
such loans, and then we didn't.
    And the question here is, can we condition our future 
contributions to the World Bank on having a U.S. veto power on 
further loans to Iran? Does anyone have an answer?
    Mr. Morris?
    Mr. Morris. Frankly, I don't think you can legislate that. 
I think that--
    Mr. Sherman. Sure we can. We can say no money shall be 
disbursed to the World Bank until the World Bank changes its 
rules so that the United States has an absolute veto power on 
further advances to Iran.
    Mr. Morris. With the threat of--
    Mr. Sherman. The question is, should we put that in--
    Mr. Morris. But you cannot--the rules of the institution do 
not support the United States.
    Mr. Sherman. Okay. The question before us here is, should 
we put that as a condition on the disbursement of American 
funds?
    Mr. Morris. I think you are right, it is perfectly 
legitimate in cases like Iran where the United States has very 
clear interests, to express those interests very clearly with 
the Bank and expect--
    Mr. Sherman. What would be the--does another witness have a 
comment? What would be the reaction of the Bank if our next 
tranche of funds was conditioned on a change of Bank rules that 
would give the United States a veto power on or prevent further 
loans to Iran? Does any panelist have--what would be the 
response of the Bank? Would we get the change or would they say 
keep your money?
    Nobody has an answer. Because I know the World Bank is 
adhering to U.N. sanctions on Iran, but none of those currently 
prevent further loans to Iran. The World Bank has promised 
Congress again and again, or the supporters of the World Bank 
have promised Congress again and again it wouldn't happen and 
then it happened.
    Mr. Morris. Congressman, can I--
    Mr. Sherman. Yes.
    Mr. Morris. And you can correct me if I am wrong. But I do 
believe that the last actual lending was--
    Mr. Sherman. It was several years ago.
    Mr. Morris. --during the Bush Administration.
    Mr. Sherman. And you can be sure that such loans will 
resume in the future unless Congress takes strong action. I am 
not saying that necessarily happens this year or next year. But 
if we don't act now, the culture at the World Bank is oblivious 
to Iran's nuclear weapons program.
    I yield back.
    Chairman Barr. Thank you. The gentleman's time has expired. 
And I thank the gentleman for his good line of questioning 
there.
    I would also like to thank our witnesses for their 
testimony today.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is now adjourned.
    [Whereupon, at 11:26 a.m., the hearing was adjourned.]

                            A P P E N D I X



                             March 22, 2017
                             
                             
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]