End the World Bank's
Corporate Welfare Programs!
by the 50 Years Is Enough Network
from the book
Democratizing the Global Economy
Kevin Danaher - editor
Common Courage Press 2001
During the l990s, the World Bank Group (WBG) saw that private
corporations were investing more in some middle-income "developing"
countries at the same time as governments were cutting aid budgets.
Rather than focus on making up the shortfall to the most impoverished
countries, the Bank is determined to jump in front of the investment
parade. It is not enough, it seems, that the rules it imposes
through its (and the IMF's) notorious structural adjustment programs
force markets open for corporations and ensure them a supply of
cheap labor and commodities. So the WBG is devoting more attention
and resources to its division that lends directly to private corporations,
the International Finance Corporation (IFC), and has assigned
it the task of devising the WBG's overall "Private Sector
The Private Sector Development Strategy aims to further the
interests of the private sector, including its expansion "into
areas traditionally the preserve of governments" in Southern
countries, such as "health and education services."
But the IFC's record in fighting poverty and protecting the environment
is abysmal, and it is even less accountable to the public than
the other components of the World Bank Group. Rather than having
its influence expand, the IFC should be abolished, along with
the Bank's other private sector arm, the Multilateral Investment
Guarantee Agency (MIGA) which provides investment insurance for
transnational corporations. An impressive consensus on this recommendation
is now emerging, one that ranges from conservative economists
advising the U.S. government to labor groups, environmental organizations
and development agencies: the IFC and MIGA are beyond reform.
The 50 Years Is Enough Network further demands that the WBG's
existing private-sector investments be liquidated to provide funds
for reparations to victims of structural adjustment and environmental
devastation caused by WBG projects.
IFC and MIGA Are Not Focused on Poverty Alleviation
Rather than make a meaningful effort to target poverty alleviation,
the IFC and MIGA operate on the assumption that any economic growth,
regardless of its distribution, will help the poor. They pay almost
no attention to who actually benefits from the profits that they
claim to generate. They support Domino's Pizza in South Africa
and cable television in Brazil. They invest in breweries in Romania,
Russia, Tanzania and the Czech Republic, expensive private schools
in Pakistan and Uganda, and luxury hotels in Egypt, the Maldives,
Vanuatu, Costa Rica and Mexico. These projects are sometimes justified
on the grounds that they create employment, but if job creation
is the goal, there are more effective ways to use limited resources.
The institutions have not even devised a way to gauge the relative
impact on impoverished peoples of different forms of investment.
Roughly two-thirds of the IFC's funding goes to projects in just
15 countries, most of them "middle-income" and thus
presumably less in need than other potential clients, but also
lower in risk for the invested dollars of the WBG and its private
They Mainly Provide Corporate Welfare for Multinationals The
IFC and MIGA's list of clients reads like a "who's who"
of transnational corporations. In the past five years MIGA has
extended more than $220 million in political risk insurance to
support Citibank's global expansion. Exxon-Mobil, Elf and BP received
more than $150 million in support from the IFC and MIGA during
this period. Likewise, $60 million went to Coca-Cola and Pepsi-Cola,
$8 million for Kimberly-Clark in China, and more than $13 million
to Radisson and Marriott luxury hotels in Costa Rica. The IFC
pays lip-service to the importance of small- and medium-sized
enterprises that create jobs and reinvest their earnings locally,
but the majority of their resources are used to support the expansion
of huge corporations into markets that World Bank and World Trade
Organization (WTO) policies have forced open.
They Focus on Environmentally Destructive Sectors
At the heart of the IFC-led "Private Sector Development
Strategy" is an emphasis on support for the oil, gas, and
mining industries. At the end of November 1999, oil and gas projects
accounted for 10 percent of the World Bank's portfolio in both
Africa and Latin America, roughly 20 percent in East Asia and
the Pacific, and even more in Europe and Central Asia. Between
1995 and 1999, the IFC channeled about 15 percent of its money
to oil, gas, and mining, and the corresponding figure for MIGA
was even higher.
While these institutions claim to be concerned about global
warming, they support fossil fuel projects amounting to billions
of dollars. By many gauges, the World Bank Group is the leading
financier of fossil fuels in the world. The institutions offer
only token support for renewable energy efforts.
Their Projects Often Have Disastrous Outcomes
In Chile, the IFC supported the Pangue hydroelectric dam on
the Bio-Bio river, but it failed to assess the impact that the
project would have on indigenous peoples and the environment.
The foundation that was established to support local communities
instead became an agent for their resettlement in order to make
way for a further dam. The Committee on Human Rights of the American
Anthropological Association concluded that there were "numerous
violations of human rights [and] environmental values." Similarly,
the IFC is currently supporting a Canadian mining corporation
in the Kyrgyz Republic. Transporting chemicals to and from the
mine has led to three toxic spills in the last two years, the
first of which spilled about two tons of cyanide into the Barskoon
River. The river is not only a source of drinking water and irrigation
for local communities, but is also upstream from the country's
largest lake and biggest tourist attraction. The mining company
took almost four hours to notify health authorities about the
spill. Approximately 2,600 people were treated and more than 1,000
of them were hospitalized.
They Reject the Public's Right to Information
If the way the IFC and MIGA are spending money is not sufficiently
outrageous, their denial of basic information to project-affected
communities is further evidence of their unaccountable nature.
In the case of the Pangue Dam cited above, a Bank-financed independent
inspector's report was so damaging that it was censored by the
IFC. A subsequent report, authorized by the IFC, was also suppressed
and the author was threatened with legal action if he disclosed
his findings. Similarly, even after the three toxic spills at
the Kyrgyz mine, the IFC refuses to release the "Emergency
Spill Response Plan" to local communities. They claim it
is a matter of business confidentiality!
IFC and MIGA hide behind information policies that are an
insult to those who believe that public institutions should be
accountable to the public. They violate U.S. law by failing to
make environmental information available at a sufficiently early
stage in the project cycle. Reports used by the Board of Directors
to judge the merit of a particular project are deemed confidential.
Following Board approval, there are no requirements to release
any information about the impacts of a project. Environmental
and social monitoring reports, emergency response plans, and evaluations
are routinely denied to the public.
Time to Take Action!
While IMF and World Bank structural adjustment policies force
an end to subsidies for the most basic goods used by the most
impoverished people around the world, the IFC continues to offer
generous subsidies to huge transnational corporations so they
can make profits in middle-income countries. They also offer insurance
to corporations against the possibility of governments one day
instituting more assertive economic policies (such as nationalization).
Our public institutions should serve higher interests than
guaranteeing private profits, particularly when the fate of the
most impoverished countries is concerned.
the Global Economy
Reforming the System