MULTILATERAL DEVELOPMENT BANKS: WHO'S THE REAL BOSS?

PCDForum Column #78,  Release Date July 10,1995

by Antonio B. Quizon

The multilateral development banks (MDBs)--the World Bank, IMF, and four regional development banks--were created by governments with public funds as public institutions. Yet they wield their enormous power largely beyond the reach of public accountability. Citizens from the Northern countries are right to ask, whether taxpayer money is being used wisely. However, Southern publics have even more at greater stake for they must live with the social and environmental consequences of MDB lending--and the debts it leaves behind.

The MDBs fall outside the formal jurisdiction of the United Nations. Furthermore, under the statutes by which the MDBs were created by their member governments, they enjoy immunity from suit for legal damages, and do not fall within the jurisdiction of any international or domestic court. Thus MDB officials are exempted from litigation for any act in the performance of "official duty," regardless of the damage a project or policy may do to a community's life, property or environment. At best, an MDB official may lose his or her job due to diplomatic pressures or an offended country may opt to withdraw its membership--yet the Bank's operations will continue.

The Asian Development Bank is a case in point. An entire chapter of its charter is devoted to spelling out the status, immunities, exemptions and privileges of the Bank and its officials. Article 50 states that "the Bank shall enjoy immunity from every form of legal process." The only exception cited is "in cases arising out of or in connection with the exercise of its power to borrow money, to guarantee obligations, or to buy and sell or underwrite the sale of securities. . . ." Thus the Bank's callable capital is available to protect the Bank's creditors (e.g. bondholders and other lenders). But there is no comparable protection for victims of the Bank's lending..

In a case documented by Bangladeshi NGOs and Greenpeace, three U.S. corporations participated in an elaborate scheme whereby industrial wastes with toxic levels of lead and cadmium were secretly mixed with other chemicals and shipped to Bangladesh as 6,300 tons of fertilizer under an ADB loan. Before the deception was uncovered, more than half of it had been distributed and spread on farmer's fields. One of the companies involved was subsequently fined $1 million by a U.S. court. Yet, the remaining 2,850 tons of toxic fertilizer still sits in Bangladeshi warehouses. Both the ADB and the U.S. government have refused to pay for its reshipment and disposal. Nor has there been any compensation for the farmers who poisoned their fields and water. Even so, Bangladesh must still repay the loan.

The ADB, as with all MDBs, jealously protects internal secrecy, and maintains virtually no systems to guarantee public access to information. Even the votes taken within its Board of Directors are considered "classified," making it difficult for public interest groups to hold their own governmental representatives accountable. Nor is there any system of public consultation with affected communities. Usually, local people learn about a project only after it has been approved and the surveyors and bulldozers arrive.

In response to mounting pressure from NGOs and some donor governments, the ADB's board of directors approved a new policy on Bank Disclosures in January 1995. A proposal to set-up a Bank Inspection Panel to investigate specific cases involving violations of Bank policies and agreements was still under discussion at the time of an NGO/Bank meeting on February 1, 1995. At that meeting the Bank refused to give NGOs a copy of the Draft Inspection Policy proposal, explaining that all proposals under Board discussion were still considered to be confidential internal documents.

MDB activities are based on a flawed Western development model that equates "development" with economic growth. Despite Asia's reputation as the fasted growing region in the world, there has been no consequential benefit to Asia's poor. MDB lending in the region has had consistently negative social and environmental consequences. An internal World Bank study on resettlement estimates that over 800,000 people have been displaced by World Bank funded projects in India alone.

NGO advocacy work in relation to the ADB centers on two themes: challenging the Bank's overall development model; and demanding that it open itself to greater public transparency and accountability. We continue to debate the basic question: should we seek to reform the MDBs or to close them? Some claim that neither is a realistic prospect. Others of us opt at the moment to work to reform the ADB, because its lending continues to adversely affect the poor and the environment and it is not likely to fade away in the foreseeable future.

Antonio B. Quizon is Executive Director of the Asian NGO Coalition, P.O. Box 3107, QCCPO 1103, Quezon City 1103, Philippines, Phone/fax (63-2) 921-5122, and a contributing editor of The People-Centered Development Forum. This column was prepared and distributed by the PCDForum based on a study co-authored by Violeta P. Corral, The Asian Development Bank Campaign. Copies of the full report are available from ANGOC.

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