TCS Daily

World Bank -- NGO Takeover?

By Alan Oxley - November 29, 2004 12:00 AM

James Wolfenson, the head of the World Bank, more than most people, has had "the NGO Experience". For years the Bank had been vilified by the left in the industrialized world. Its sin was that it promoted free market economics. When Wolfenson took over the Bank in 1995, he "reached out" to the NGOs. They bit back. It is said he now recognizes his willingness to find common ground has not been reciprocated. But does he fully understand the NGOs real strategy and how far he has compromised the Bank's core values?

Wolfenson took over the World Bank committed to improving its capacity to deliver its mission. His immediate predecessors had been administrators. The Bank is a large, bureaucratic and slow moving organization. As Sebastian Mallaby, the author of "The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations" (The Penguin Press) puts it, Wolfenson was inspired by the leadership of Robert McNamara. He wanted to see the Bank acting more directly to helping the world's poor.

Mallaby's account of the politics of global aid is enlightening. His reportage on Wolfenson is as intriguing as the man himself. Wolfenson had the drive to reshape Bank activity and produce direct results, but not the experience to manage a large international public sector agency. The outcome was a mixture of success and failure.

Mallaby's coverage of NGO interaction with the Bank has attracted the most attention. He details how the pro-Tibet lobby blocked a project in an adjoining Chinese region which the locals, including the local Tibetan minority, supported. He shows how the anti-dam NGOs blocked a dam in Uganda that would have provided electricity to thousands of Ugandans. He went to Uganda to talk to the local protest groups which NGOs in Washington had described as a mass movement. The leading local protest group had 27 members.

The talk in the Bank is that Wolfenson considers his overtures to the NGOs to have been abused. He has institutionalized consultation, established joint programs and made the bank an organization that "listens". He found NGOs don't want to be listened to, they want their way. Mallaby's message seems clear. Wolfenson is signaling "enough".

Mallaby has only looked at the NGOs that confront the bank. He does not examine those who want to "capture" it. Consider the effect of the "partnership" the Bank has with the Worldwide Fund for Nature (WWF). The Bank and WWF have formed an "Alliance" for Forest Conservation and Sustainable Use. The result is that the Bank is now doing what it tells developing countries not to do -- playing favorites, interfering in the market, disregarding sound governance and being lead by a group that opposes free market systems.

Ever since developing countries blocked the idea of a World Forestry Convention at the Rio Summit in 1992, WWF has been pushing its own model of how forests should be "sustainably" managed. It created the Forest Stewardship Council (FSC), which developed a set of standards for forest management. They incorporate WWF's ecological view of forestry. It is set up as a business. FSC sells ecolabels which verify forest products come from forests it has approved, usually to retailers like Home Depot in the US and B&Q in the UK.

It has not been a commercial success. The program has had to rely on funding from US environmental funds, the European Commission, some European Governments, like the Dutch, and the Ford Foundation.

Privately operated forest industries generally do not like the WWF/FSC system. They consider its values biased and radical. FSC forestry standards include WWF policies that forest companies should commit not to use GMOs and to take political positions on international environmental agreements.

The greatest concern is with governance. The FSC system does not meet the "arms length" governance requirements of the International Standards Organization (ISO) to ensure standards are not dominated by one interest and that systems for verification are independent. Like most NGOs, the FSC governance arrangements are murky. On close examination, it is clear the WWF controls the FSC and its standards.

European forest industries established their system to demonstrate sustainable management of forestry. This has been internationalized as the PEFC system. Its standards are independent and meet ISO criteria. The system does not have a commercial ecolabel. Since the PEFC system got underway, its coverage of world forestry has expanded rapidly and now exceeds that of the FSC. Global competition between the schemes is fierce.

Despite this, the World Bank seems to have taken sides, and the wrong one at that. This year the "Alliance" drew up criteria to "measure the comprehensiveness" of systems of sustainable management of forests (i.e. the FSC and the PEFC). It invited both groups to comment on the criteria. Since WWF controls FSC, this is like the Bank's collaborating with Coca-Cola on standards for a soda formula, then inviting Pepsi to comment on them.

PEFC has said it will participate if the criteria are drawn from scratch. The Bank has refused so PEFC will not collaborate. The Bank now finds itself in an extraordinary position. Its processes on forestry policy appear to have been captured by the WWF.

Forest industries are important industries in developing countries. The Bank is reportedly working with WWF to foster forest management policies in Laos, Vietnam and Cambodia. Presumably these will be FSC standards and all that goes with them. These will not be the world's best practice standards used by European forest industries, which are among the most sustainably managed in the world; these will be the WWF's ecological version of what it thinks forestry standards should be.

Furthermore, WWF has been the leading NGO critic of the WTO and has a long term goal of securing change to the WTO's rules that would green the organization and compromise its fundamental principle of promoting growth based on free market economy principles.

The only successful formula for eradicating poverty in the developing world has been to foster free markets. The Bank is allowing NGOs like the WWF to corrupt those principles and to shape its policies in developing countries.

Alan Oxley is a former Chairman of the GATT, the predecessor to the WTO.


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