By Cheryl Strauss Einhorn
World Bank President Jim Yong Kim |
Accra is a city of choking red dust where almost
no rain falls for three months at a time and clothes hung out on a line dry in
15 minutes. So the new five-star Mövenpick hotel affords a haven of sorts in
Ghana’s crowded capital, with manicured lawns, amply watered vegetation, and
uniformed waiters gliding poolside on roller skates to offer icy drinks to
guests. A high concrete wall rings the grounds, keeping out the city’s
overflowing poor who hawk goods in the street by day and the homeless who lie
on the sidewalks by night.
The Mövenpick, which opened in 2011, fits the
model of a modern international luxury hotel, with 260 rooms, seven floors, and
13,500 square feet of retail space displaying $2,000 Italian handbags and other
wares. But it is exceptional in at least one respect: It was financed by a
combination of two very different entities: a multibillion-dollar investment
company largely controlled by a Saudi prince, and the poverty-fighting World
Bank.
The investment company, Kingdom Holding Company,
has a market value of $12 billion, and Forbes ranks its
principal owner, Prince Alwaleed bin Talal, as the world’s 29th-richest person, estimating
his net worth at $18 billion. The World Bank, meanwhile, contributed its part
through its International Finance Corporation (IFC),
set up back in 1956to muster cheap loans and other financial support for
private businesses that contribute to its planet-improving mandate. “At the
World Bank, we have made the world’s most pressing development issue—to reduce
global poverty—our mission,” the bank proclaims.
World Bank Logo |
Why, then, did the IFC give a Saudi prince’s
company an attractively priced $26 million loan to help build the Mövenpick, a
hotel the prince was fully capable of financing himself? The answer is that the
IFC’s portfolio of billions of dollars in loans and investments is not in fact
primarily targeted at helping the impoverished. At least as important is the
goal of making a profit for the World Bank.
I reached this conclusion after traveling to
Ghana—in many ways typical of the more than 100 countries where the IFC
works—to see firsthand the kinds of problems the World Bank’s lenders are
supposed to tackle and whether their efforts are really working on the ground.
I pored through thousands of pages of the bank’s publicly available reports and
financial statements and talked to dozens of experts familiar with its
performance in Ghana and many other countries.
In case after case, the verdict was the same:
The IFC likes to work with huge corporations, funding projects these companies
could finance themselves. Its partners are billionaires and massive
multinationals, from oil giants like ExxonMobil to Grupo Arcor, the huge
Argentine candy-maker.
Its projects include not only glitzy hotels and high-end
shopping malls, but also gritty gold and copper mines and oil pipelines, some
of which end up benefiting the very corrupt, authoritarian regimes that the
rest of the World Bank is urging to change.
Nearly a quarter of the IFC’s
paid-in capital from member governments—now standing at $2.4 billion—came from
U.S. taxpayers, and every president in the World Bank’s 69-year history has
been an American. But the United States has had little complaint with these
practices, even when they have become a subject of public controversy.
World Bank Head Office |
Not long ago, the World Bank’s internal watchdog
sharply criticized the IFC’s approach, saying it gives little more than lip
service to the bank’s poverty-fighting mission. The report, a major 2011
review by the bank’s Independent Evaluation Group, found that fewer than half
the IFC investments it studied involved fighting poverty. “[M]ost IFC
investment projects generate satisfactory returns but do not provide evidence
of identifiable opportunities for the poor to participate in, contribute to, or
benefit from the economic activities that the project supports,” the report
concluded.
In fact, it said, only 13 percent of 500 projects studied “had
objectives with an explicit focus on poor people,” and even those that did, the
report found, had a “limited” impact. The IFC did not dispute the conclusions.
There is certainly need in countries like Ghana,
whose per capita GDP ranks in the bottom third of the world, with life
expectancy in the bottom 15 percent and infant mortality in the bottom fourth.
The IFC committed about $145 million in loans and equity in Ghana just in
fiscal year 2012. Yet Takyiwaa Manuh, who advises the Ghanaian government on
economic development as a member of the National Development Planning
Commission, told me she doesn’t think of the IFC’s investments “as fighting
poverty. Just because some people are employed, it is hard to say that is
poverty reduction.”
But the policies continue. Why? Tycoons and mega
companies offer relatively low risk and generally assured returns for the IFC,
allowing it to reinvest the earnings in more such projects. Only a portion of
this money ends up benefiting local workers, and critics contend that the IFC’s
investments often work against local development needs.“The IFC’s model itself
is a problem,” says Jesse Griffiths, director of the European Network on Debt
and Development (Eurodad), a Belgian-based nonprofit. “The IFC undermines
democracy with its piecemeal, top-down approach to development that follows the
priorities of private companies.”
“We’re not saying we’re perfect,” Rashad Kaldany
told me. He is a veteran IFC executive and currently its vice president for
global industries. The IFC operates “at the frontier,” he said. “We know that
not every project will work. It’s about trying to make a difference to the poor
and about achieving financial sustainability”—twin goals that are challenging
in combination.
When it comes to luxury hotels like the
Mövenpick in downtown Accra, however, the IFC offers no apology for its
investments, even making the case for them as an economic boon for poor countries.
A January 2012 report from
the World Bank says hotels “play a critical role in development as they
catalyze tourism and business infrastructure,” noting its partners include such
“leading” firms as luxury chains Shangri-La, Hilton, Marriott,
InterContinental—and, of course, Mövenpick.
Movenpick Hotel In Accra |
In Accra, Mary-Jean Moyo, the IFC’s in-country
manager for Ghana, told me the new hotel fights poverty by creating jobs. To
illustrate, she recalled how the Mövenpick’s manager “noticed that a few boys
roller-skate on Sundays outside the hotel. The manager decided to hire them to
work at the pool. That is development and helping local people.” How many were
hired, I asked. Six, Moyo responded.
When I spoke with Stuart Chase, the Mövenpick’s
manager, he told me that other kinds of investments besides the new hotel he
was clearly proud of would do far more to stimulate Ghana’s economy and reduce
poverty. Chase, who has lived and worked in Ghana for years,mentioned the
country’s congested and potholed roads, poor electricity system, limited food
supplies, and lack of trade schools. “There is no hotel school and no
vocational training in the country,” he complained. As a result, all the top
staff members among his 300 employees are foreign.
Besides, Accra already has close to a dozen
luxury hotels. Before taking over the Mövenpick, Chase managed another nearby
five-star hotel owned by Ghana’s Social Security and National Insurance Trust,
the country’s pension system. So when the IFC decided to finance Prince
Alwaleed’s hotel, it was entering into direct competition with the people it claims
it wants to lift out of poverty. Moyo acknowledged to me that the IFC didn’t
study the local hotel scene before making this investment, unlike its standard
practice. “We knew the company and had another successful investment in Kingdom
that made the Ghana deal attractive to us,” she said. The other investment? A
$20 million deal in 2010 to help develop five luxury venues in Kenya, complete
with heated swimming pools, golf courses, and organized safaris.
U.S. Sen. Patrick Leahy, a Vermont Democrat who sits
on the Senate Appropriations subcommittee that has jurisdiction over U.S.
participation in the World Bank, called the Ghana loan “not
an appropriate use of public funds” when alerted to it by a 2011Washington Times article.
The U.S. Treasury Department, which administers American participation in the
World Bank, defended the loan, telling the newspaper that the IFC package
replaced funding expected from private banks that pulled out when market
conditions soured, putting the entire $103 million project at risk. When I was
in Accra in July, however, at least two other major hotel projects were under
construction with private financing obtained in the same period. The prince’s
representatives didn’t respond to requests for comment.
* * *
Many Children acess to potable water |
Luxury hotels and resorts are hardly the only
IFC investments that offer at best limited prospects for serving its
poverty-fighting mandate. Founded just a dozen years after the World Bank
itself, the IFC has in recent years become its fastest-growing unit. It now has
a staff of some 3,400 people in 103 countries and made $15 billion in loan
commitments in 2012 across about 580 projects—more than double its 2006 total
and a figure that’s projected to grow to about $20 billion in the next few
years.
The original notion was that while the World
Bank was lending directly to poor countries, the IFC would stimulate the growth
of private businessu, entrepreneurship, and financial markets in some of those
same countries by lending to and investing in for-profit corporations. The founders,
notably including a General Foods executive named Robert Garner, emphasizedthat the IFC
would participate only in projects for which “sufficient private capital is not
available on reasonable terms.”
That concept has become muddied over the years,
as well-heeled borrowers with excellent credit have sought to take advantage of
the IFC’s relatively attractive loan terms and other investment vehicles, plus,
in some cases, the cachet associated with World Bank support.
The IFC’s growth
got a boost in the early 1980s when it was permitted for the first time to
raise money from the global capital markets by issuing bonds. More recently,
its growth has accelerated as it has entered new businesses, including trade
finance, derivatives, and private equity, sometimes to the annoyance of private
banks with which it competes.
Today, the IFC’s booming list of business
partners reads like a who’s who of giant multinational corporations: Dow
Chemical, DuPont, Mitsubishi, Vodafone, and many more. It has funded fast-food
chains like Domino’s Pizza in South Africa and Kentucky Fried Chicken in
Jamaica. It invests in upscale shopping malls in Egypt, Ghana, the former
Soviet republics, Eastern Europe, and Central Asia. It backs candy-shop chains
in Argentina and Bangladesh; breweries with global beer behemoths like
SABMiller and with other breweries in the Czech Republic, Laos, Romania,
Russia, and Tanzania; and soft-drink distribution for the likes of Coca-Cola,
PepsiCo, and their competitors in Cambodia, Ethiopia, Mali, Russia, South
Sudan, Uzbekistan, and more.
The criticism of most such investments—from a broad
array of academics and watchdog groups as well as local organizations in the
poor countries themselves—is that they make little impact on poverty and could
just as easily be undertaken without IFC subsidies. In some cases, critics
contend, the projects hold back development and exacerbate poverty, not to
mention subjecting affected countries to pollution and other ills.
The debate is swirling as the World Bank has a
new leader, installed in July: Jim Yong Kim, an American physician who recently
stepped down as president of Dartmouth College. The bank declined to make him
available to comment for this article, and in his brief tenure so far, he has
given little hint of his view of the IFC. In both his statement when he
took office in July and on his first overseas visit, to Ghana’s neighbor to the
west, Ivory Coast, he did note briefly the importance of the IFC within the
World Bank Group and of the private sector to global job creation.
The IFC is also in the middle of a change in
leadership. Its former head, Lars Thunell, recently completed his term, and
Chinese national Jin-Yong Cai, a Goldman Sachs partner who was in charge of the
firm’s Chinese banking operations, succeeded him in October. At that time,
Kaldany, who had been serving as the IFC’s acting CEO, stepped back to the post
of vice president for global industries.
The IFC’s operations have been the subject not
only of outside criticism but of significant parts of 2011’s stinging internal
report and other critiques from within the World Bank. The2011 document, in which
the bank’s Independent Evaluation Group examined the IFC’s activities over the
previous decade, portrayed a profit-oriented, deal-driven organization that
often fails to reach the poor, and at times may even sacrifice the poor, in a
drive to earn a healthy return on its investments: “Greater effort is needed in
translating the strategic intentions into actions in investment operations and
advisory services to enhance IFC’s poverty focus.”
But the IFC’s money-generating strategy has at
least one benefit: It sustains the jobs of the people who work for it. The
“more money the IFC makes, the more the bank has [available] to invest,” says
Griffiths, the director of Eurodad. “Staff is incentivized to make money.”
Francis Kalitsi, a former IFC employee who is
now a managing partner at private-equity firm Serengeti Capital in Accra, has a
similar view. “To get ahead, you had to book big transactions,” he recalls of
his time at the IFC. “The IFC is very profit-focused. The IFC does not address
poverty, and its investments rarely touch the poor.”
The IFC sets annual targets for the number,
size, and types of deals employees should complete, and it awards performance
bonuses for reaching these targets, according to several current and former IFC
staffers. “If you don’t reach the target, you don’t get a bonus,” sayms Alan
Moody, a former IFC manager who now works elsewhere at the World Bank. Deals
often come to the IFC from private companies, not the other way around. “We
choose our projects by identifying key clients and asking them what their needs
are,” says the IFC’s Moyo. That means, though, that by following private
companies’ priorities, the IFC makes investments that are not necessarily
aligned with countries’ own development strategies.
Even if the IFC focused more of its resources on
poverty, it doesn’t have a good way to track whether its work has any impact.
The 2011 report—which advises that the IFC “needs to think carefully about
questions such as who the poor are, where they are located, and how they can be
reached”—criticizes theIFCfor lacking metrics for its investments, saying it
fails to “[d]efine, monitor, and report poverty outcomes for projects.”
The IFC does not contest these criticisms. Its
management responded to the evaluation group’s report by stating, “We broadly
agree with [the] report’s lessons and recommendations” and conceded that the
“IFC has not been consistent in stating … the anticipated poverty reduction
effects of a project.” The IFC notes that it several years ago began using a
Development Outcome Tracking System (DOTS) to measure the effectiveness of its
projects at spurring economic development and alleviating poverty. This system,
however, has drawn snickers from a number of IFC clients.
They note that the
DOTS ratings rely heavily on self-reporting by the recipient companies and
depend to some extent on financial data for the entire firm, often with
multiple divisions around the world, rather than focusing on the specific area
of the IFC-funded project. Still, Kaldany expresses enthusiasm for the effort,
saying it is pathbreaking and getting better.
Meanwhile, there has been little evidence of
change on the ground. Everywhere I looked—in Ghana, in nearby West Africa, and
globally—the IFC still seems to be giving its mandate to fight poverty short
shrift.
In finance, for example, R. Yofi Grant,
executive director of Databank, one of Ghana’s largest banks, told me that the
IFC’s practice of providing loans at attractive terms to multinational
companies “crowds out local banks and private-equity firms by taking the
juiciest investments and walking away with a healthy return.”
Grant says that the IFC recently organized a
$115 million financing package for global telecom giantVodafone to expand its
operations in Ghana, even though six telecom companies already operate in the
country. Despite such robust private investment, the IFC’s loan package for
Vodafone was its second in two years. “That is not poverty reduction, and these
are not frontier investments,” Grant says, referring to the IFC’s refrain that
it invests where other financiers might not. “The IFC says all the right things
and does all the wrong things.”
* * *
A thousand miles east of Ghana are Cameroon and
Chad, which exemplify a major and highly controversial domain of IFC
investment, one where the stakes are often higher than with hotels and shopping
malls. That domain is energy.
As of the end of 2011, the IFC reported a $2
billion oil-and-gas portfolio, investing with 30 companies in 23 countries and,
the IFC boasted, achieving “Award
Winning Recognition from the Market.” But critics, including environmentalists
and nonprofit groups such as the Bretton Woods Project and Christian Aid,
contend that the projects often exacerbate the poverty they are supposed to
alleviate. The projects, they say, frequently escalate local conflict and
corruption, displace communities, disrupt livelihoods, and contribute to the
emission of greenhouse gases and other pollutants.
In 2003, an independent review panel within the
World Bank even recommended that the bank, including the IFC, pull out of all
oil, natural gas, and coal-mining projects by 2008, saying such loans do not
benefit the poor who live where the natural resources are found. But the World
Bank’s board overruled these recommendations. The bank ultimately agreed to an
approach that is “business as usual with marginal changes,” Emil Salim, the
Indonesian officialwho led the bank’s review, told Bloomberg News in 2004. In a
conference call with reporters at the time, IFC executive Kaldany said, “There
was very broad consensus that we should remain engaged; we do add value.”
The example of Chad and Cameroon, however,
offers a more complicated picture. In 2000, the IFC invested roughly $200
million with ExxonMobil, Chevron, and others, along with the governments of
Chad and Cameroon, to support the construction of a nearly $4 billion
oil-pipeline project that experts estimate will generate more than $5 billion
in revenue over the 25-year life of the project from wells mainly in landlocked
Chad to a port in Cameroon.
The two countries are even poorer than Ghana to
the west. Per capita income in Chad ranks 193rd in the
world, compared with 185th place for Cameroon and 172nd for Ghana. Life
expectancy at birth in Chad, at 48.7 years, is the
world’s absolute worst, and the country has been ruled for the last two decades
by heavy-handed dictator Idriss Déby.
“Conditions were and are a hardship and
horrible,” says Peter Rosenblum, co-director of the Human Rights Institute at
Columbia University, who argued that the pipeline project should demand
protections for the civilian population. The bulk of the oil revenue was
supposed to be set aside for food, education, health care, and infrastructure.
But in the face of attacks from rebel groups supported by neighboring Sudan,
and asserting a need to defend the pipeline, Déby instead channeled substantial
chunks into arms purchases, bringing criticism not only from human rights
groups but from the World Bank. As critics of the project had warned, the oil
bonanza increased the stakes for control of the country and added to the civil
strife.
What happened with Chad is not an isolated
incident. Despite perennial controversies over energy and mining projects,
often the subject of fierce disputes related to everything from their
environmental impacts to the extent they boost authoritarian regimes, the IFC
continues to invest in them extensively. Just in 2012, the IFC announced
investments in mining projects for gold, copper, and diamonds in places like
Mongolia, Liberia, and South Africa, as well as investments in oil and gas projects
in Colombia, Ivory Coast, the Middle East, and North Africa.
Moreover, as with Chad’s Déby, the IFC continues
to lend and invest in countries with heavy-handed rulers such as Syria (Bashar
al-Assad) and Venezuela (Hugo Chávez). Kaldany told me there were about a dozen
dictatorships, which he wouldn’t name, where the IFC would simply not do
business.
But then there is a second tier, where he is inclined to work. “It is
a tradeoff. We can have a positive influence,” he said, referring to a recent
IFC deal in now civil war-torn Syria to fund microfinance. He said the IFC is
insisting on increasingly tight financial controls in such countries to ensure
that the proceeds from the projects are targeted directly to the poor rather
than to sustaining the dictators’ hold on power. He acknowledged that the
controls in the Chad case were not nearly tight enough and that the IFC
ultimately had to pull out.
The IFC’s critics see two obvious ways to fix
it: dramatically overhaul its priorities or sharply reduce its funding and
channel those resources toward the type of World Bank projects that more
closely align with its anti-poverty mission.
Kaldany said that the IFC is seeking to increase
its number of small projects, of under $5 million and tightly targeted on the
poor, and to devote more attention to the poorest of the poor countries. In the
most recent fiscal year, it generated 105 of the smaller projects, 20 percent
of its total deals, although a much smaller percentage of its total dollar
outlays. (IFC officials couldn’t immediately provide that number.)
But don’t count on a new direction. Although its
new leadership has remained publicly mum, the IFC’s new chief, Cai, has told
people he strongly supports its current strategy.
* * *
In Accra, not far from the new Mövenpick, the
IFC’s posh offices—sporting a lawn, flowers, and private parking—sit amid a
slum, surrounded by an imposing concrete wall topped by coils of barbed wire.
The only paved part of the road to the IFC is directly in front of the guarded
complex, which has no sign announcing its identity. The rest of the road is a
winding, dusty dirt path filled with potholes and surrounded by hovels erected
out of battered metal or wood.
Barefoot children sit amid goats and roving
chickens, on ground dotted by garbage and litter. Women cook tiny fish strung
onto sticks over an open fire, ignoring the near-100-degree temperatures. I
approached them one day in July, and some of them said they had lived there for
15 years. When asked whether they knew what the World Bank is, they said no.
When told that it fights poverty, many of them laughed.
“We need help, and we know there are places that
help,” said one woman who was cooking as two young boys clung to her legs. “But
we have never heard of them.”
This story was co-published with Foreign Policy.
EDITORIAL
TAKE THEM BACK
The committee for Joint Action (CJA)
has asked the Mahama administration to take back all government lands and
properties illegally handed over to individuals and we agree.
Over the years prime government lands
and bungalows have been acquired by individuals with connections in high places
under dubious circumstances.
In one instance land earmarked for
the building of the office of the
Ministry of Foreign Affairs was shared amongst party faithful and government by
loyalists.
The practice has continued even within
the last five years and many properties owned by the Government of Ghana in La
Bone, Ringway Estates and Cantonments have been handed over to friends of the
powerful.
Given the fact that the “Stealing” of
government lands has become a major election issue and the need to protect the
public interest, the Insight has no hesitation in endorsing the demand of the
CJA.
Government lands belongs to the people
of Ghana in their collective and individuals who have managed to grab them
should be compelled to return them to the state.
The people of Ghana are waiting to see
what their government will do to protect their interest.
This is a legitimate demand and it
ought to be met.
THE NKRUMAIST
The Socialist Forum of Ghana (SFG) is
publishing a special magazine to mark the anniversary of the overthrow of
Osagyefo Dr Kwame Nkrumah on February 24, 1966.
The
magazine will carry features and photographs on the life and times of
the Osagyefo.
Those who have been invited to
contribute articles include comrades T.K.A Nubour, Yaw Opoku, Justice Henaku,
Yao Graham, Kwame Wiafe and Lt Owusu Gyimah.
The SFG invites all comrades who wish
to contribute articles to the publication to send them to theinsightnewspaper@yahoo.com
or deliver them personally at the offices of The Insight.
Soft copies of the articles will be
preferable. Photographs of the Nkrumah era will also be very useful for the
publication.
All articles and photographs are to
reach the SFG by Friday February 15, 2013.
Other activities planned to mark the
day include a public lecture by comrade Kyeretwie Opoku at the Freedom Centre
on Wednesday, February 20, 2013 at 6:00pm and the opening of the Freedom
Bookshop at the Kwame Nkrumah Circle on February 25, by His Excellency the Vice
President, Paa Kwesi Amissah – Arthur at 3:00pm
There will also be a film show on the
life and times of Nkrumah at the Freedom Centre in Accra on Friday, March 1,
2013 at 6.00pm.
Palestinian docs to bear ‘Palestine’
name
Palestinian stamps, signs, and letterheads are to be changed in accordance with the new order.
The announcement comes a month after the United Nations recognition of Palestine as a non-member observer state.
On Friday, Abbas called on rival Palestinian factions, Hamas and Fatah, to put an end to their five-year-long dispute and unite, calling for national unity.
Abbas said earlier that 2013 would be the year of Palestinian statehood and independence.
On November 29, 2012, the 193-member UN General Assembly voted 138-9 with 41 abstentions at the UN headquarters in New York to upgrade Palestine’s status at the UN to non-member observer state.
The United States and the Israeli regime were among those UN members that voted against the resolution.
The observer state status grants Palestinians access to UN agencies and the International Criminal Court. The upgrade also allows Palestinians to participate in debates at the UN and improves their chances of joining UN agencies.
France is totally bankrupt: French
employment minister
French Employment Minister Michel Sapin
French Employment Minister has questioned the economic policies
of President Francois Hollande, admitting that the European country is “totally
bankrupt.”
Michel Sapin |
Michel Sapin's remarks were made during a radio interview on Tuesday, where he also warned against Hollande’s controversial “tax and spend” policy, which has made many high-profile people move abroad.
“There is a state but it is a totally bankrupt state,” said Sapin, adding, “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.”
France’s Finance Minister Pierre Moscovici gave an immediate response saying the remarks were ‘inappropriate.’
Meanwhile, a recent poll in the French daily Le Figaro showed
that 80 percent of the population agree with Sapin’s viewpoint.
The French employment minister’s comment comes as Hollande is trying to improve the image of the French economy after vowing to reduce the country’s deficit through spending cuts by 60 billion euros (USD 81 billion) and increasing taxes by 20 billion euros (USD 27 billion) over the next five years.
According to figures published by France’s National Statistics Institute (INSEE) in September 2012, France’s national debt has reach 90 percent of its gross domestic product (GDP).
Europe plunged into financial crisis in early 2008. The worsening debt crisis has forced EU governments to adopt harsh austerity measures and tough economic reforms, which have triggered incidents of social unrest and massive protests in many European countries.
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