Beijing Water

World Bank chief to exit with a mixed legacy

Inter Press Service (Johannesburg)   January 4/2005

World Bank chief to exit with a mixed legacy   by Emad Mekay

Washington:World Bank President James Wolfensohn says he will not seek a third term at the helm of one of the world’s most important financial institutions, as Bank watchers say he is leaving a mixed legacy marred by a series of failures and disappointments for the world’s fight against poverty.

During a Jan. 2 television interview, the septuagenarian former Wall Street banker said he was unlikely to stay in his post and hinted that there was a lack of support from the U.S. government, the dominant power within the World Bank.

“I’ve had ten years, and I think that’s probably enough, but if the need is there, I’ll do whatever the shareholders want,” said Wolfensohn, who is a naturalised U.S. citizen. “My understanding and my belief is that probably during the course of this year, I’ll give over to someone else.”

So far, no clear successor has emerged for the high-profile post.

World Bank insiders told IPS that the president, who took over in June 1995, would like to be remembered for reaching out to the Bank’s critics within civil society and development organisations.

They said his legacy included focusing on corruption, demanding better governance, pushing for increased debt forgiveness and introducing initiatives that emphasise country ownership of poverty reduction strategies and more interaction between governments, the private sector and non-governmental organisations.

The World Bank lends more than 20 billion dollars annually to developing nations and its policies, advice and projects have a tremendous impact on millions of poor people in borrowing nations in the developing world.

But many of the civil society groups that campaign for an end to poverty and inequality, and which Wolfensohn allegedly tried to engage, say that the soft-spoken banker was not as successful as his friends and promoters at the Bank assert.

“I think that Wolfensohn genuinely did listen to a variety of stakeholders, including civil society organisations, and that he was sensitive to listening to views outside the World Bank, which I think is a very important trait that he possesses,” said one source close to the Bank.

“However, he is very mercurial in the sense that he moves from one topic to another so quickly that the type of impact that we’d have liked to have was not as evident as we would have hoped,” said the source, who wished to remain unidentified.

And while Wolfensohn listened, it is not clear that he influenced other senior management to heed advice from outside the Bank.

“Although we may have had Wolfensohn’s ear or his sensitivity towards some issues, it is not clear to me how well he brought the institution with him when he came to listen,” said Manish Bapna, executive director of the Bank Information Center, a Washington-based monitor of the Bank and other international financial institutions.

Other watchdog groups say that Wolfensohn risked his own reputation and legacy at the World Bank over a series of issues that ended in rebuffs of grievances by independent development groups and poor nations.

That includes his reluctance, and perhaps failure, to push for the adoption of recommendations stemming from an independent review of the Bank’s huge loans and investments to the extractive industries in developing nations.

The Extractive Industries Review, which came out at the end of 2003, recommended that the bank bail out of oil, gas and mining projects and redirect the investments to renewable energy. In the end, the Bank said it would increase its “clean investments” but would also continue loans to those industries.

Critics say the experiment was particularly embarrassing for Wolfensohn personally because it was he who commissioned the study in the first place, and then failed to abide by its recommendations.

“Wolfensohn, I think, did go out on a limb and stake his reputation a bit on the report. but at the end of the day he did distance himself a little bit from the report and in so doing, he weakened the strength of the report somewhat,” said one source.

The other achievement he is credited with by Bank insiders is advancing debt relief to the world’s poorest nations, although watchdog groups say the issue only moved forward after intense lobbying by anti-poverty campaigners and appeals from indebted nations 10 years ago.

And while he also made battling corruption a priority, again, some say he only acted under pressure.

“I think that under Wolfensohn, the Bank has gone after corruption more, but it’s taken a lot of pressure from outside the Bank to help make that happen,” said Juliette Majot, executive director of the International Rivers Network.

For example, it was only after an aggressive lobbying campaign by development groups that the Bank seriously considered blacklisting Acres International, a Canadian construction firm, for corrupt practices in a massive water project in the African nation of Lesotho.

Many advocates of human rights, social justice and the environment charge that under Wolfensohn, the Bank diluted its own guidelines for borrowing nations and companies that work on Bank-funded projects.

“Under Wolfensohn’s leadership, for the best intentions he stated when he came into office, environmental safeguards, safeguards for human rights, safeguards for indigenous people have declined, absolutely declined,” Majot said. “The policies are not as strong as they once were.”

For example, the Bank now wants to rely on the environmental regulations of the middle-income nations it lends to, instead of the Bank’s own, generally stricter guidelines.

Under Wolfensohn, the Bank is also returning to high-risk lending and large-scale infrastructure projects like dams which environmentalists argue are unsustainable.

“I think overall his performance has been mixed,” said Bapna. “He came in with a lot of passion and a lot of interest to move the institution towards addressing poverty in a more profound way.

“However, many of the critics argue that without challenging the prevailing economic policies and development paradigm of the Bank, his emphasis on poverty reduction remained largely rhetorical.”

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