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The
politics of reconstruction
Recent involvement in
countries such as Afghanistan and Iraq has put World Bank and IMF
post-conflict operations in the spotlight. While some believe
multilateral finance is essential, others argue that the Bank and the
Fund are acting primarily as pawns of powerful diplomatic and economic
interests.
The proportion of conflict-related World Bank activities and financing
has increased significantly in recent years to represent over a fifth
of total current Bank lending. While this is undoubtedly part of the
Bank's original remit, some observers have questioned its motives for
stepping up work in this area.
In a new report on Afghanistan, Anne Carlin points out that "the World
Bank, normally highly risk-adverse, is justifying the risk it assumes
in today's post conflict situation as a return to its roots". She says
International Financial Institutions (IFIs) are seeking "new lines of
business" at a time when large borrowers such as India and China turn
to other sources for major projects. Indeed language in some Bank
documents is more evocative of a commercial strategy than of
development assistance: "new products for a new era".
The arrival of the Fund and Bank in Iraq was greeted by many with the
headline: "Meet the new boss". Critics have voiced opposition to what
they see as the Bank and the IMF taking advantage of post-conflict
situations to reshape a country's economy and act as a Trojan horse
for private interests located in the most powerful countries. An
important contribution to the debate on who benefits from
reconstruction would be the publication of figures about what
percentage of World Bank contracts and funds go to contractors and
consultant firms from which countries. These figures are not currently
available.
A related problem is the political signal sent by intervention in some
countries engulfed in the so-called war on terror. Just as post-World
War II IMF and Bank operations were driven by realpolitik, the Bretton
Woods institutions are now being accused by critics such as Focus on
the Global South of "doing the dirty work of the Empire". In Iraq,
international institutions (and some NGOs) run the risk of being seen
as providing a fig leaf for US and UK interests. Should multilateral
poverty reduction resources be spent to rebuild a country shattered by
US and British bombs without an international mandate?
The deepest concern of many civil society groups is the influence that
IFIs can achieve in a country that has to 'start from scratch'. Groups
in Sri Lanka, East Timor and Afghanistan have denounced the leverage
that the Bank and the Fund have on their countries. The Bank, in its
role as government financier and donor coordination takes up powerful
positions.
A Bank study, Breaking the Conflict Trap argues that "there is a
strong consensus that only the World Bank can provide the experience,
drive, and diversity of knowledge required for effective leadership of
international assistance to post-conflict civilian reconstruction."
However it adds: "With that consensus comes a responsibility for the
Bank to listen, consult, and facilitate -qualities not traditionally
associated with this institution."
Can World Bank and IMF policies and conditionality contribute to the
emergence of (or lead to the resumption of) violent conflict,
especially civil war? In her book The Balkan Tragedy, Susan Woodward
argues that the shift to a market economy, and in particular IMF
programmes, with their "socially polarizing and politically
disintegrating consequences" contributed to the implosion of
Yugoslavia.
Amy Chua of Yale Law School says war in Sierra Leone in the 1990s was
the result of factors that include the presence of a dominant Lebanese
minority, and the hardships created by "what IMF negotiators called
'bold and decisive' free market measures", mostly a phase-out of
subsidies. "Conditions were ripe for the anarchy that followed".
Canadian researcher Michel Chossudovsky blames World Bank and IMF
policies for exacerbating tensions that led to the Rwandan genocide.
A report by Anne Carlin for US-based NGO Bank Information Centre looks
at IFI involvement in Afghanistan. The report shows how after a
23-year absence the World Bank, Asian Development Bank and IMF
re-engaged in 2001. They immediately sat at the Afghan
government-planning table and after six weeks proposed new policies to
a resource-starved government, desperate to get access to
international aid to secure legitimacy.
One of the first steps taken by IFIs in Afghanistan was to ensure debt
arrears to themselves were cleared. This was done through donations of
bilateral donors administered by the World Bank and "skimmed off the
top before the remaining funds were made available to the Afghan
government".
IFI involvement covers all major sectors, from water to health and
education to governance and administration. Carlin credits the IMF for
"one of the most significant achievements to date": the introduction
of a new currency, the new Afghani. But overall the reforms currently
being carried out are problematic. While a stated objective is
capacity building of government, "policy reforms and capacity building
are being addressed in a manner that suits donors, not Afghans".
With numerous international consulting firms hired to "fill the
capacity vacuum … the policies are written first and staff is later,
maybe, trained to follow these policies - rather than having their
capacity developed to enable them to write these policies in the first
place." (Rush to Reengagement in Afghanistan: The IFI's Post Conflict
Agenda, by Anne Carlin, BIC, December 2003)
Carlin cautions against the rush to rewrite a comprehensive set of
policies until there is a truly representative government with broad
support. Reforms under way include a law on private and foreign
investment that "would expedite the investment process, grant tax
waivers based on terms of investment, exempt some exports from taxes,
and allow for tax-free repatriation of funds." There is no guarantee
that Afghans will benefit from such business activity.
Open University course director Joe Hanlon entitled his review of a
recent Bank report - Breaking the Conflict Trap- "World Bank admits
its policies caused war". He pointed out that the report argues it
would be "particularly helpful" to prevent war if the poorest
countries could "diversify out of dependence on primary commodity
exports", while the Bank has played a role in de-industrialisation and
pushing countries into dependence on a few commodities.
Most observers however agree it would be misleading to lay the blame
for any given conflict solely on Bank and Fund policies. Chris Cramer
and John Weeks from the School of Oriental and African Studies caution
against "isolating an individual policy mechanism, or even a package
of policies".
To be continued…
Solomonkebede@yahoo.com
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Tuesday
April 13' 2004
