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Date: Tue, 7 Nov 1995 17:44:20 GMT
Sender: Activists Mailing List <ACTIV-L@MIZZOU1.missouri.edu>
Subject: STRATEGIES ON THE INTERNATIONAL FINANCIAL INSTITUTIONS (1/2)+(2/2)

/** econ.saps: 249.0 **/
** Topic: STRATEGIES ON THE IFIs **
** Written 6:37 PM Oct 25, 1995 by ax:pacs in cdp:econ.saps **

Building Strategies on the International Financial Institutions

By Marcos Arruda, Institute of Alternative Policies for the Southern Cone of Latin America, Rio de Janeiro, Brazil, 25 October 1995

PACS - PRIES/CS
Alternative Policies for the Southern Cone of Latin America
Rua da Gloria, 190/502 - 20241-180 Rio de Janeiro, Brasil
Tel. (5521) 252 0366, fax 224 3107, email: pacs@ax.apc.org

Ref.: Text prepared by PACS, in collaboration with the Canadian NGO Coalition on the IFIs, as a contribution to the NGO strategy meetings on the IFIs, held in Washington DC, October 1995. We would be happy to receive your comments and suggestions. Marcos Arruda.

CONTENTS

Introduction
1. Identifying the problem
2. Identifying the interests
3. Identifying the goals
4. Identifying the issues
5. NGO Action Strategies

Non-Conclusive Remarks

Summary Recommendations

INTRODUCTION

The intent of this paper is to share reflections about NGO strategies and tactics based on what I have learned from those organizations and networks, and from my relatively short, but quite intensive, experience of work with NGOs on International Financial Institutions, in particular the World Bank, as coordinator of the NGO Working Group on the World Bank and liaison officer of the NGO-World Bank Committee.

Strategy is a military term related to the command employed to meet and overwhelm the enemy under conditions advantageous to one's own force. Its meaning is also related to a plan or method for achieving an end. In both cases, it is a science or an art clearly connected to broad ultimate goals.

The definition of tactics is not very different. Yet, its meaning is usually related to the maneuvering of forces in combat. Whereas tactics is related to the target, or to the specific and short-term goal of winning a combat, strategy is related to the general and longer term goal of winning a war.

NGO and social movement strategies, with regard to the International Financial Institutions (IFIs), vary according to their respective strategic goals. And these vary very widely. Their concepts of what the problems are and what interests are involved also vary. For some, the IFIs are the enemy, or at least a part of the enemy. For others, they are an actual or a potential ally. For others still, they are a real, powerful, global economic agent within a system that needs to be transformed. The strategy to transform that system includes dialogue interaction and, at the same time, confrontation with the power agents, according to the effective force accumulated by those who strive for transformation.

This diversity of approaches among NGOs and social movements makes the challenge of discussing strategy vis-à-vis IFIs both difficult and complex. It is unavoidable that this paper will make a number of generalizations. Herein, I am taking the view of those NGOs and social movements that struggle for a profound and systematic transformation of socio-economic relations and of the prevailing values and concepts underlying them. For them, this is the only path to overcome problems such as hunger, poverty and impoverishment, growing indebtedness, wealth and capital concentration, the ills resulting from markets manipulated by oligopolies and cartels, serious inequalities in international trade, etc. At the same time, I am drawing from the experience of a wider spectrum of NGOs.

One example is the NGO Working Group on the World Bank, a group of 26 national and international NGOs, and national or regional networks, with heterogeneous views, approaches and motivations. This group meets and interacts regularly with Bank directors and administrators, mainly on issues related institutional, socio-economic and financial policy. Despite the diversity of views and approaches, the NGOWG members do arrive at consensus positions and lines of action, as the studies they have produced demonstrate. Other sources on which this paper is based include the Asian NGO Coalition and the Asian Development Bank Campaign, EURODAD, Washington DC-based NGOs, the Swiss Coalition, Public Services International, the incipient LAC and Brazil Networks on IFIs, and certain local joint organizations of NGOs and popular groups, such as the Narmada Bachao Andolan, the Rondonia Forum of NGOs and popular organizations and the Nepalese Arun Concerned Group.

In concluding, I would like to thank Robin Round, of the Canadian MDB Coalition, Peter Padbury, of Canadian Council for International Cooperation, and Blaine Marchand, of Friends of The Earth, Canada, for the opportunity to offer my views to the participants of the NGO strategy meetings held in Washington, in October, 1995.

1. IDENTIFYING THE PROBLEM

1.1. DEVELOPING COUNTRIES AND THE POOR SUFFER MUCH MORE FROM WHAT THEY LOSE FROM BEING UNEQUAL PARTNERS IN THE GLOBAL ECONOMY THAN FROM THE LACK OF FINANCIAL RESOURCES.

Strategies regarding the IFIs should consider the problem of maldevelopment as a whole. The smaller and poorer the country, in terms of natural resource endowment, the more important the aid component becomes. However, even the smaller and poorer countries seem to suffer more from what they lose or transfer to the industrialized countries than from the lack of financial resources. The most relevant evidence is presented by the United Development Program Human Development Report 1992, (pp. 66-67). The document cites that developing countries suffer major losses not only due to negative net transfers related to debt, deterioration of terms of trade and various forms of illegal financial transfers (capital flight, manipulation of transfer prices in intrafirm transactions, tax evasion, etc.), but also due to being denied market opportunities. The UNDP estimate for those losses in 1990 amounted to US$ 500 billion, whereas aid transfers to the South reached only US$ 54 billion. Increased assistance will continue to be ineffective unless OECD countries and the Bretton Woods institutions act upon the factors of structural drainage of capital and resources from the South.

NGO action on the IFIs should consider the issue of international aid in the broader context. NGOs should articulate their action plans in such way that, side by side with the issues raised by multinational development loans, they include the most important factors of impoverishment and maldevelopment, in the agenda of interaction with the IFIs.

1.2. FROM BEING A TEMPORARY FORM OF INTERNATIONAL SUPPORT, AID HAS BECOME A PERMANENT FEATURE OF THE GLOBAL ECONOMY.

Developing country losses being so much greater than the value of Official Development Assistance (ODA) each year, and having persisted for so many years, it is not surprising that aid has become a permanent feature of North-South relations. As global wealth increases and continues to concentrate more in highly industrialized countries and in the hands of local elites, demand for development aid also increases. True policy reforms to redistribute wealth and access to resources, both nationally and internationally, are preconditions for demands that international aid gradually decrease and be replaced by various forms of domestic product investment.

1.3. THE IFIs ARE MORE THAN MULTILATERAL AID AGENCIES: THEY ACT INCREASINGLY AS GLOBAL PLANNERS AND GLOBAL MANAGERS.

Financially, the IFIs intervene in the South as aid agencies. Euphemistically, they are called international cooperation agencies. Politically, however, they do much more than to grant loans to developing countries. They propose projects and participate in their identification and design. They have crews of experts studying the countries and producing reports. They design sector policy and macroeconomic policy, and establish conditionalities that oblige the borrower to abide by their policy guidelines. In recent decades, an effective transfer of the power to plan and define stabilization, adjustment, growth and socioeconomic development shifted from the governments of developing countries to the IFIs.

The amount being transferred annually by IFIs to the South is insignificant when it is compared with the private transfers through financial loans, credit lines and foreign direct investment. The IFIs have a power of influence over the borrowing developing countries that is disproportional to the amounts they lend to them. Yet, their influence is powerful because their international scope allows them to act as agencies of an invisible global government which can be identified as the G7 and an amalgamation of large transnational groups.

1.4. OTHER FACTORS OF IMPOVERISHMENT AND DECAPITALIZATION OF DEVELOPING COUNTRIES ARE ALSO DISREGARDED BY POLICY MAKERS.

IFI analysis and strategies to combat poverty either neglect or insufficiently address other macroeconomic factors:

Besides, stabilization and adjustment policies marked by a neoliberal bias tend to deepen, rather than overcome, the impact of most of these processes. They tend to induce imitative patterns of consumption and production, with serious economic, social, cultural and environmental consequences for the wage-working majority and for those excluded from the labour market.

2. IDENTIFYING THE INTERESTS

There is broad consensus among NGOs that the IFIs, far from fulfilling their mandate not to intervene in the politics of their member-countries -- imposed by their original Agreement—have become tutors of the borrower governments. This is especially so since the early 80s when the debt crisis unfolded. The IFIs directly and indirectly influenced the internal policies of developing countries. And, such influence generally coincided with the interests of the governments and economies of the industrialized countries (their main stockholders) and of transnational groups which originate in those countries.

Although governments tend to present themselves as representing the interests of their nation's majority, they are often in open contradiction, and even antagonism, with the concerns and needs of large sectors of the population, above all the oppressed and the excluded. IFIs tend to identify themselves with the government sector. They argue that the policies and development programs are government property, and their own role is only to make them viable. NGOs should develop the capacity to analyze the actual interest involved in each policy or project so as to side clearly with the poor and the excluded. An understanding of the nature, trends and limits of competitive globalization, and the role of IFIs in the process, is also crucial. Methodologically, the starting point for long-term, effectively transformative action is a strategic vision that gives guidance to the action plans and articulates each tactical action with a longer term goal and the process to accomplish it.

NGOs should be able to tackle the contradictions of IFIs and adapt their strategies to the ambiguities that have become part of their nature. The World Bank and the regional development banks, for example, are interventionist institutions by nature, in spite of doctrinally promoting the ideology of the free market. They operate, on the one hand, as commercial banks, aiming primarily at expanding their development loans (which are actually their investment) and at maximizing the profits they will generate. At the same time, they constantly intervene in the market, whether to benefit the private sector, or to promote social policies, hunger and poverty alleviation policies to compensate for the failures of the free market.

But IFI-instilled compensatory policy does not truly address the roots of the dynamics of impoverishment and decapitalization. The more imitative the policies being implemented, the more afflicted the Southern countries are by economic, social and ecological ills already afflicting the North, aggravated by the inequalities inherited from their colonial past. The rationalization occurring in the modern sectors of the Southern economies is reproducing the phenomenon of economic growth associated with growing structural unemployment, typical of the North.

Ironically, however, the IFIs also have the potential of effectively influencing government and market agents towards responding to human development needs. To do so, NGOs and social movements advocate that IFIs should promote deep changes in policy, in structure and in institutional dynamics, including their system of decision-making and of accountability. They should press persistently for the introduction of participation of the impoverished sectors in the socio-economic of their communities and their countries as a precondition for development to be just, effective and sustainable.

3. IDENTIFYING THE GOALS

3.1. An outstanding debate, especially during 1994 and the actions around the Bretton Woods 50th anniversary, had to do with the long term goal of the struggle around the IFIs. Should we be fighting for deep reforms of these institutions, or rather for their definitive closure? Different NGOs and social movements have taken one or the other position.

Arguments on behalf of closing the IFIs include:

i) a history of bad, inefficient and failed policies and projects, which have contributed to deepening domestic and international inequality and injustice and the destruction of the environment;

ii) a history of intervention in the markets on behalf of private business, and on national politics on behalf of the local elites and their corporate interests;

iii) persistent lack of transparency and of internal democracy; and

iv) growing capacity of the IFIs to co-opt public opinion and individual social actors.

Arguments for deep reforms include:

i) the main goal should be to overcome the market- and money- centred type of development and globalization, of which the IFIs are simply one component;

ii) the existence of multilateral institutions and international spaces of negotiation and governance, in a world which is undergoing rapid globalization, should not be underestimated; the question is not to close them down, but rather to transform them and democratize them;

iii) there are instances where IFIs such as the World Bank have acted on behalf of the poor and of a better environment, thus strengthening the position of NGOs and social movements in the face of anti-social approaches adopted by the national government; such behaviour can become more pervasive as social pressure mounts and is more deeply effective; and

iv) social pressure has already proved effective with respect to the World Bank and the Asian Development Bank; the global movement on behalf of deep IFI reforms is gathering strength and momentum and should go on.

3.2. Nevertheless, for a growing number of social movements and NGOs, no path will be strategically effective unless it is envisaged in the broader context of the struggle for a deep structural, institutional and relational reorganization of the global economic and financial system itself, and the establishment of people- and community-centred forms of development, from the bottom upwards, and from the local toward the global spheres.

3.3. Calling the IFIs development institutions is linked to the notion that the developed countries are the term of reference, that their form of development is the only one possible for the rest of the world, and that developing countries need help to reach the patterns of production and consumption of the developed world.

Many social movements and NGOs, supported by institutions of the UN family, question this concept, arguing that:

3.4. It is important for NGOs and social movements to have a clear set of strategic goals with respect to the IFIs. However, disagreements should not prevent them from joining forces around shorter term goals and specific campaigns.

3.5. One example is the thrust for short term, compensatory social policies versus long term, transformative policies. The former are crucial to alleviate extreme poverty and save lives of those in danger.

The same can be said about policies and measures to remedy environmental destruction. However, neither one per se is a solution. They must be designed and implemented in connection with policies aimed at overcoming the factors generating poverty, exclusion and ecological damage.

4. IDENTIFYING THE ISSUES

4.1. PROJECTS

NGOs have adopted a number of approaches regarding projects funded by IFIs, among them:

4.2. MACRO SOCIOECONOMIC POLICIES

IFIs have persistently resisted accepting discussion about macroeconomic policy with social organizations. The most persistent seems to be the IMF, but the hurtle exists at the level of the management and directorship of all IFIs. There is an entrenched conviction that they know everything about how to make the economy work anywhere in the world. They are the doctors (PhDs) and the physicians. Science and technology are on their side, so how can ignorant persons, or persons who know nothing about neo-classical economics, dare question their views and their policy counsel?

Three areas of policy debate are at stake when planning strategies. One is sector policy, which involves the set of reform proposals by the IFIs concerning sectors like energy, transport, banking, agriculture, education, health, etc. The second is national policy, involving reform proposals with respect to national monetary, fiscal, investment and income policy. And the third is a broader discussion about socioeconomic philosophy, which deals with key concepts and relationships such as the human being, the market, the State, society, work/labour/employment, development, democracy, etc. This discussion has practical consequences as it allows NGOs to question unrealistic, metaphysical assumptions and to influence the definition of strategic goals and priorities for macro socioeconomic policy.

4.3. IFI INSTITUTIONAL AND POLICY REFORM

NGOs have been actively pressuring for institutional and policy reforms of the IFIs. Institutional issues that have been addressed so far include mainly information and accountability. On IFI policy, issues such as participation, gender, indigenous peoples, multilateral debt have been the most relevant.

5. NGO ACTION STRATEGIES

5.1. ON PROJECTS

Among successful public campaigns concerning IFI-funded projects, we refer to three of them, due to the lessons they provide with respect to present and future strategies to deal with IFIs.

Under pressure from NGOs, social movements and public opinion in general, the World Bank decided in 1993 to establish an independent Inspection Panel, which would receive complaints from organizations or individuals representing those affected by a Bank-funded project regarding the compliance to Bank regulations and to the terms of the loan contract. The first case presented to the Panel was the Arun III Hydroelectric Project in Nepal. The Arun Concerned Group, in articulation with local organizations of affected people, and other national and international NGOs led a campaign demanding not only the cancellation of Arun III but the discussion among government, the World Bank and social organizations about alternative proposals to Arun III. The Panel recommended that an investigation should address International Development Association (IDA) adherence to its policies and procedures relating to environmental assessment, involuntary resettlement and indigenous peoples. The Bank agreed to undertake the investigation but noted that the Panel did not request investigation of alternatives to Arun III.

After a long process, in which NGOs and representative social groups combined negotiations with the government, the Inspection Panel and the Bank administration, public information campaigns and outside pressure through international NGO networks, on August 21st, the World Bank decided to stop funding Arun III.

Despite the adjective independent, the Panel was created by the World Bank, and abides by the Bank's conditions with respect to transparency. It is ultimately accountable to the Bank's Board of Directors. Therefore, much needs to be done if societies are to count on a truly independent court of appeals. Also on the agenda is the pressure for other IFIs to take similar steps, as the World Bank, and become more publicly accountable.

Another partially successful campaign concerned the Sardar Sadovar Project (SSP) in the Narmada Valley. It led to massive mobilization of affected families around crucial issues related to the survival of their villages and their culture, resettlement, the sharing of benefits with the local inhabitants, and the environmental impact of the series of dams included in the project. The campaign was led by the Narmada Bachao Andolan (NBA), a network of NGOs and social organizations, and involved national and international pressure being placed on the local and national governments as well as on the Bank's Board of Directors and Administration.

In 1992, the commission set up by the Bank to evaluate the SSP published what became known as the Morse Report. This report was sharply critical of the project and recommended cancellation of the Bank disbursements. It took the Bank almost one year finally to decide to stop funding the SSP. Presently, hundreds of families who were resettled outside the dam area are returning due to the failed fulfilment of the project's terms of resettlement. One relevant aspect of the campaign is the fact that the Bank's Project Completion Report (PCR), published last April, concludes that the Bank has clearly been a party to the project, and its omissions and commissions have been directly responsible for many things that have seriously gone wrong with it. In spite of this rigorous diagnosis, the PCR suggests that the Bank consider funding the project again.

In a letter to the Executive Directors last June, the NBA recalled that, despite the fact that the Bank stopped funding the SSP, the project's essentially negative impacts are still continuing, including displacement. The letter mentions Narmada, Singrauli and Subernerekha, among others, and presents a number of suggestions for the Bank to prevent current and future destruction. Finally, it refers to new, socially and environmentally, benign paradigms of water management which are evolving all over the world. It underlines the desirability of a holistic approach to river valley planning.

The World Bank quotes the PLANAFLORO and PRODEAGRO natural resource management projects in Brazil as examples of collaboration with NGOs towards the active involvement of local populations in project decision-making and implementation. However, obstacles to the actual participation of primary stakeholders have been so persistent, above all on the part of the Federal and State governments, that in 1994 the Rondonia NGO and PO Forum asked the Bank to stop disbursements to PLANAFLORO until those obstacles were removed. Currently, the Forum has presented the case to the Inspection Panel, accusing the Bank of omission with respect to the fulfilment of the PLANAFLORO terms of contract and of its own directives.

Poverty and Environmental Assessments at both the project and the country level, adopted as policy procedures by the World Bank, are also demonstrations of how effective NGO action on IFIs has been.

5.2. ON MACRO SOCIOECONOMIC POLICY

The case of Arun III, Nepal, is one in which NGO and social movement networks have pressured for both change in one specific project and change in sector policy. Environmental NGOs, in turn, have interacted with certain IFIs on other sector issues such as forestry, agriculture and food security, with different degrees of practical success. One factor that makes it difficult to make genuine progress in changing IFI sector policy is the multiplicity of countries being subjected to a type of unified pressure in the same direction by IFIs. This would demand an articulate action vis--vis different IFIs at the same time. Another factor is that while the IFIs design and implement sector policy coherent with their macroeconomic policy and their philosophical foundations, NGOs at times question sector policy in isolation.

Most important here is that Southern NGOs and popular organizations concerned with IFI sector policies develop collaborative ties with national, regional and international networks and articulate pressure at the same time on the national government, on the IFIs' Board members and administration, resorting to visible tactics involving press coverage whenever necessary. Networks such as the Asian Development Bank Campaign, the Japan Bretton Woods Coalition, the NGO Working Group on the World Bank, EURODAD or the Latin America and Caribbean (LAC) Network on IFIs should be requested to participate in the design and implementation of an action strategy related to sector policy. These should be addressed to each and every actor involved and unfold from the local to the global level.

The Asian NGOs, in particular, have engaged the Asian Development Bank (ADB) in an effort not only to stop badly-designed, destructive projects, but to involve the Bank in more constructive dialogue on alternative policies and on development models that incorporate greater transparency and public accountability, as well as social and environmental concerns raised by affected communities (ANGOC, 1995). On sector issues they report that through sustained NGO efforts, the Bank has begun to take interest in resource management and sustainability of agriculture, substantially increased forest sector lending and begun to target key questions related to land and resource tenure issues, environmental protection, foreign debt, law enforcement and indigenous peoples’ rights, energy conservation, etc. In this context, the Bank drafted, in 1994, a set of new policies on forestry, energy, population, involuntary resettlement and information disclosure which Asian NGOs critiqued during a region- wide consultation in April 1994.

The NGO debate with IFIs on macro socioeconomic issues currently covers three areas of dialogue:

Even the more open people in the IFI staff have difficulty discussing the assumptions behind their policy guidelines. One word that generates impatient reaction, if not aggressiveness, among IFI staff is paradigm. They generally do not accept that the main terms of reference of their economic thinking are questionable, that the neoclassic academic dogmas in which they were trained to believe hinder, rather than help, them from identifying the real problems and getting to the real solutions.

Yet, this is a crucial area of debate for NGOs and social movements. There is no possibility of a profound change in direction for the IFIs as long as their leadership holds on to the market-centred paradigm. Nor is the market-centred paradigm compatible with people-centred development. Yet, the World Bank manages to preach the latter while practising the former. This is one reason why it is so widely criticized as inconsistent in its practice.

We know from experience that debate only at the conceptual level is sterile. The NGOWG is one of the networks that tried this with little success. It did raise crucial conceptual issues with the World Bank, and confronted the Bank with critical macro socioeconomic studies (The NGOWG Position Paper, 1989; the three case studies on Structural Adjustment in Mexico, Senegal and Sri Lanka, in 1993; two documents dealing with the Bank's policies on poverty, in 1994), but found the Bank staff generally were closed to deeper discussion, particularly to the challenge of drawing practical consequences of the discussion in terms of change in policy, method and approach. Most impressive was the Bank's and the IMF's insensitivity to the lessons emerging from the failure of their adjustment model in Latin America: Mexico.

A highly effective work focused on the Southern countries' foreign debt and structural adjustment policies done by the European Forum on Debt and Development (EURODAD). It combines clarification of Southern NGOs' position, careful elaboration of the alternative proposals for debt reduction or cancellation, negotiations with and pressure on national governments in both the North and the South and on the IFIs, and skilful work in public information. Particularly important is the focus on bilateral and multilateral debt. Relevant progress is being made on bilateral debt, and a proposal of for sale of IMF gold to be used for multilateral debt reduction of SILICs, originated among NGOs, is now a British government proposal. The Bank and the IMF insist, however, that debt is no longer a critical problem. NGOs must continue presenting evidence to the contrary and pressing governments and IFIs for policy changes with respect to debt.

Overall, if we want to get to the discussion of concepts and assumptions, the most effective approach is inductive. Start from facts and field evidence related to problems, mistakes and failures, then move forward to seeking the determining factors. Insist on unveiling the contradiction between the IFI rhetoric and practice. Do not accept to halt discussions at the level of where the factors are visible. They are there because other, often invisible, factors exist as a precondition to them. This is usually the way reality is perceived, problems are identified and challenges understood. Also do not accept empirical evidence based on economic indicators only, in isolation from indicators related to human—social, political and cultural—and environmental costs of policies, programs, and projects.

5.3. ON IFI INSTITUTIONAL AND POLICY REFORM

Pressure by environmental NGOs has been particularly effective in the area of both IFI institutional and policy reforms. The combination of drawing evidence from the field on concrete environmental issues, articulated by local organizations, especially in developing countries, and direct interaction with IFI directors, as well as highly visible tactics to publicize the issues and gain press coverage have been successful in obliging IFIs, and also private companies, to become more accountable and transparent and, at times, even to change policy.

The pressure has been uneven, considering that the World Bank and regional development banks, especially the Asian Bank, have been targeted by public campaigns for reform much more emphatically than the IMF. The reasons are:

1) the IMF has shown much less flexibility and willingness to interact with social organizations than the other IFIs; and

2) the IMF does not grant loans for micro projects, thus being less exposed to specific public critique. Only in the 1980s did the IMF start playing a more visible role, placing loans both for debt repayment and for structural adjustment programs under stringent conditionalities.

The Asian Bank’s and World Bank’s new information policies, the IBRD’s Inspection Panel and the Participation Action Plan are three examples of successful campaigning for more transparency and better accountability and popular participation. However, even these achievements are only partial victories so far. One example of a critical type of document which is still not publicly available are the Country Assistance Strategy reports, which outline the World Bank's overall investment strategy in the borrowing country. As for the Inspection Panel, it needs a much more autonomous status and a more transparent and democratic structure if it is to become a truly independent course of appeals on behalf of those affected by Bank-funded projects. It should also be given a mandate with respect to the Bank's programs and policies in so far as they affect whole sectors of the borrowers' economy, and clearly have social and environmental impact. The shortcomings of the Bank's Participation policy were pointed out in the Addendum prepared by NGOs to the document The World Bank and Participation (September, 1994).

Much more, however, remains to be done with respect to the other IFIs. NGOs should more effectively tackle the IMF, for example, on issues such as accountability, adjustment and debt policy and transparency. They should place more concerted and systematic pressure on governments for concrete reform of the IMF and for concrete IMF policy changes. They should also pressure the World Bank to ensure that its progressive policy changes regarding information, accountability and participation also encompass the IFC. And they should target IFIs on the need to include redistributive, comprehensive agrarian reform as a crucial policy to be pursued with borrower governments, especially in LAC.

Particularly effective has been the action of Washington-based NGOs on the government of the USA, concerning its policies and financing towards IFIs. These NGOs have been able to exert pressure on the Executive and to be present in Congressional Commissions, seeking to influence decisions with respect to US foreign aid and IFI institutional and policy reform, offering policy alternatives regarding USA replenishment of IFIs. Other NGOs, such as the Swiss Coalition in Switzerland, and Christian Aid, in the UK, have established an effective interaction with the IFIs' Executive Directors from their respective countries, thus exerting considerable influence both in the country's approach to the IFIs and in concrete policy issues standing for decision in its Governing Board.

The structure of IFI decision-making, the use by IFI administration of scarce financial resources for such vast development needs, and the staff's wage and benefits policy are areas not yet effectively addressed by NGOs.

5.4. IFI POLICIES ON NGOs

Environmentally-oriented NGOs take much of the credit for the sensitivity IFIs, particularly the World Bank and the Asian and Interamerican Development Banks, show today vis-à-vis NGOs. Since the 70s, NGOs have been systematically raising crucial issues related to the environmental impacts of IFI policies and projects. Development NGOs have gradually joined in and have the merit of raising social and cultural issues, but also pointing out that environmental problems are also a by-product of the growth-at-all-costs types of development path chosen by an individual country and by global geoeconomic units, such as the West, or the centrally-planned economies. The fact is that both types of NGOs have moved closer to each other both in conceptualizing contemporary problems and in devising strategies and implementing concrete action.

Nowadays the World Bank and the ADB have published a number of policy papers on how they should relate to NGOs and how NGOs should be included in various levels of project design and implementation, and in policy discussion. Both created special units to serve as references of the IFI-NGO interaction and nominated local staff responsible for the IFI- NGO relationship. NGOs have also been involved in field projects, through specific sub-contracting arrangements. IFIs have also pressed national governments towards the establishment of interaction and collaboration with NGOs.

IFIs have come to the point of seeking forms to direct financing to NGOs. This has raised intricate problems related to whether the funds should be passed directly or through the national government, and whether transfers should take the form of grants or loans. NGO autonomy, on the one hand, and IFI conditionality, on the other, seem to be the main issues at stake. The wisest guidelines for future discussion are:

1) NGOs ought to consider carefully the risks and opportunities of direct funding by IFIs, or funding through national or local governments, especially in the light of possibly unavoidable conditionalities;

2) in case they accept either type of funding, it should be linked to genuinely democratic and accountable procedures, especially vis-à-vis the primary stakeholders; and

3) they should be aware that IFI funds for specific projects or programs involve much less risk of being co-opted than any type of core funding that ties the NGO.

Experience has shown that the greater the understanding between NGOs and social movements, the stronger the pressure and the bargaining power with respect to government and IFIs. The more collaboration exists between Southern and Northern NGOs and social movements, the more likely it is that IFIs will recognize their demands and respect them as partners in discussion.

NON-CONCLUSIVE REMARKS

The lack of space and time to continue oblige me to refer to a recent study, published by PACS, with the title NGOs and the World Bank: Is It Possible to Collaborate Critically? This study includes a chapter on NGOs strategies vis-à-vis the Bank and the NGO Working Group on the World Bank and the NGO-World Bank Committee. I will now make three non-conclusive remarks, as seeds for further discussion.

First, the experience of working with impoverished sectors of populations of countries with high levels of poverty—including those called middle income countries, such as Brazil and Mexico—shows that the IFIs are faraway from adopting the adequate approach and rhythm to their interventions that allow for popular participation to be effective. It is not only quanti- tative results that matter, but mainly qualitative ones, which are rather invisible: those related to behaviour, attitude, and cultural, social- psychological, mental and spiritual needs of individuals, communities and countries. The deepest dimension of transformation that is sought through development action, if one aims at a just, participatory and sustainable development, is that in which people—both individually and collectively—build themselves into subjects of their own development, masters of their own history and become fully committed to that role, with all the contradictions and difficulties it may imply. This commitment does not emerge from any bureaucratic decision from the outside, nor from the apparently omnipotent will of a funding agency or of any power agent, nor from the influx of sufficient material resources. Rather, it results from a complex process of inner persuasion by thinking and doing, winning and losing, and then again thinking and doing; a process that encompasses external and internal obstacles which demand patience, persistence and much work to be overcome.

Second, IFIs are beginning to realize that purely economic and financial indicators are insufficient to picture the complexity of the life of nations. But they have done little or nothing to innovate. They have not even acknowledged the contributions emerging from their non-financial relatives within the UN family, such as the UNDP's human development index. In consequence, they continue to be trapped in the ideology of unlimited economic growth as the panacea for all evils and in growth indicators as the basis for the formulation of policies and for decisions about priorities, programs and projects. NGOs need to pressure them toward overcoming the economistic and reductionist market-and money-centred paradigm both in theory and in practice.

Third, among the elements for an action strategy towards true human development is the recognition that, even if reformed, the IFIs would not be able to accomplish fully and effectively crucial functions such as regulation, control and sanction which are needed to bring order to the chaos of the current international socio-economic and finance; global management of the environmentally destructive mechanisms and forces; and legislation and implementation of policies to overcome conflicts and violence. It is crucial to articulate action on IFIs with action aimed at the creation of new global, democratically structures and organizations, empowered to tax transnational corporations, commercial banks and foreign exchange transactions, to introduce ethical principles to global business. Such action should also aim at the establishment of an Economic and Environmental Security Council in the context of a democratically reformed United Nations.

SUMMARY OF RECOMMENDATIONS

1. RELATIONSHIP NGOs - PEOPLE'S ORGANIZATIONS

There is often a gap between NGOs and POs. This raises problems such as legitimacy, credibility and accountability. It also discredits NGOs in the eyes of the IFIs, particularly those who finance development projects. The more connected NGOs are with POs, the stronger their national and international networks and the more powerful their pressure on governments and on the IFIs.

2. RELATIONSHIP NORTHERN - SOUTHERN NGOs AND POs—

This relationship has been problematic in some ways. Southern NGOs in general have been less active and organized than Northern NGOs, with relevant exceptions, particularly in Asia, where broad, active NGOs networks have developed. This has put a heavier burden on Northern NGOs, which have often taken initiatives on behalf of the South without consulting or gathering the necessary support from the South. Recent years have seen great progress in overcoming both shortcomings. But more needs to be done in both hemispheres to create a truly articulate, efficient global action NGO network of networks on the IFIs.

3. NGOs WORKING ON THE IMF -

Here are the most important focuses for an NGO strategy on the IMF, which emerges from work done by NGOs and others so far:

3.1. The IMF should relinquish its development lending activities to other institutions, in order to refocus its attention on global monetary affairs. Its main goal should be to create a monetary order that foster closing the growing income gap between the poor and the rich countries. The IMF and global monetary policy cannot solve this problem but they can be structured to assist in its solution, rather than be an obstacle. The IMF can also be brought to function as an effective curtailer of global financial speculation.

3.2. The IMF, or a new, more effective and more democratic supranational structure should not work independently, but rather serve the purposes of human development-oriented macro socioeconomic policy. It is unlikely that the World Bank or any other existing multilateral institution will play the role of a global human development agency. Such an entity should become part of the NGO international agenda. At the same time, the IMF should be given authority and relative sovereignty over the global economy as a whole, so as to bring both borrowers and non-borrowers under the influence of its policy recommendations.

3.3. The IMF should be praised for having introduced a new method of calculating country GDP figures, utilizing the purchasing power of country currencies, rather than their official exchange rates with the dollar as a basis. It must now be pressured to test the feasibility of an entirely new type of international currency, which would not be identified with any individual nation and would maintain a constant purchasing power, based perhaps on a basket of commodities.

3.4. The IMF should be pressured to push the usage of Special Drawing Rights (SDR) more vigorously on a needs- determined basis that would benefit poor countries. Since the IMF is pray to the interests of its wealthy members, it is crucial to mobilize US Congressional support to push the Treasury Department towards new monetary initiatives such as the SDR. This would be beneficial for the world and for the USA.

3.5. The IMF's undemocratic nature is expressed both in its structure and in its policies. NGOs should pressure both governments and the IMF for more democratic voting arrangements and less secretiveness about its inner workings, opening up to public scrutiny and participation.

3.6. The governments and the IMF should be pressured to provide funding for the new World Bank plan to establish a special Multilateral Debt Facility (MDF), which hopefully will be discussed and approved in the Annual General Meetings this October. The plan is an important step towards the recognition of multilateral debt as a general problem and should be endorsed by NGOs. The IMF should look as creatively as the World Bank has done into all possible resources it can make available to develop innovative mechanisms to finance multilateral debt relief.

3.7. More strategically, however, NGOs should work for debt reduction or cancellation, rather than only renegotiation. Stronger action by Southern NGOs with respect to their governments is needed, in articulation with the very competent work being promoted in the North by EURODAD.

3.8. The Halifax meeting of the G7 made specific recommendations to the IFIs, many of them very constructive and in line with proposals made by NGOs. Specifically on the IMF, the G7 made proposals which NGOs should endorse and push for, such as: 3.8.1. more openness and transparency in its assessment and policy advice (NGOs should continue to pressure for a new information policy, making public the Policy Framework Papers and the supporting documents prepared by the Fund's mission to a country);

3.8.2. the establishment of its own independent evaluation unit; NGOs should continue to pressure for periodic audits to review systematically the policy prescriptions recommended and required by the Fund in the areas of poverty and the environment.

References

Robert S. Browne, Alternatives to the IMF, and Richard Gerster A New Framework of Accountability for the IMF, in Beyond Bretton Woods, TNI/Pluto, 1995; James Tobin, A Proposal for International Monetary Reform, Eastern Economic Journal, vol. 4, July/Oct. 1978, pp. 158-9, and A tax on International Currency Transactions, in Human Development Report 1994, UNDP, New York; and EURODAD, Third World Debt in the 1990s, issue n. 13, July 1995, Brussels.

4. NGOs WORKING ON THE WORLD BANK -

Much more progress has been achieved from the interaction with and pressure on the World Bank than on the IMF and the RDBs. Strategically, however, only an integral approach by the NGO and PO movement worldwide will be effective in generating the desirable transformations. World Bank initiatives which are convergent with NGO demands should be strongly supported. NGOs should not only express bitterness at what still needs to be changed, but also support and recognition for what is being changed and improved. This gives them more solid ground to continue pressing for further changes. Here are some strategy recommendations related to some of the most pressing issues being addressed:

4.1. The Bank should adopt poverty eradication as its strategic goal and establish a broadly participatory process of dialogue, including primary stakeholders, aimed at focusing its policies on:

4.1.1. the poorest of the poor, on an emergency basis; and

4.1.2. the national and international mechanisms of impoverishment, which are responsible for making the world's majority poor.

4.2. Policy must establish the means to recreate the market as a tool under the control of society, to deprivatize the State, and to subject the market and private economic agents to the priorities of human and social development at all levels. The Bank should recognize the crucial role of policy in all areas where the market functions inadequately for the benefit of all and not just a few.

4.3. Bank policies should address the gender dimension of all economic, political and social realities. NGOs should pressure the governments and the Bank for all economic programs to be based on the recognition of the rights of women and the assessment of the effect they will have on women as well as men.

4.4. The Bank’s development policies should be guided by the following macroeconomic objectives:

4.4.1. to allocate a much greater proportion of the surplus to productive capital accumulation, at the expense of consumption of the privileged income groups;

4.4.2. to redistribute a significant portion of the productivity gains and the new productive capital accumulated into the hands of the labor force, thus counteracting the tendencies towards jobless growth and towards concentration of capital, income and wealth; and

4.4.3. to devote a prudent part of the surplus to creating new employment opportunities and new forms of remuneration, and improving the social and private consumption, mainly in the poor social sectors, thus reinforcing the redistributive effects of the higher rate of capital accumulation.

4.5. In particular, the emphasis should be on participation by poor people, including popular and workers' organizations who represent the poor. Participatory development involves economic and political empowerment based on increased ownership and management of productive resources, and a recognition of the importance of non- market institutions in the realm of the State and of civil society. The Bank should make this empowerment the foundation of its work with governments.

4.6. NGOs should stress the need for the Bank to rethink the whole project cycle including participation by all stakeholders at all stages; the need to take a transformational approach, instead of the traditional instrumental approach, to participation by engaging and empowering communities to set development priorities; and acknowledging that the Bank, itself, is a stakeholder.

4.7. Full and meaningful participation is only possible if the World Bank becomes democratic and is made accountable and transparent to the public in whose name finance is being provided and who ultimately must repay the resultant financial obligations. NGOs must continue to pressure for more democratic voting allocations, better accountability, greater transparency and access to information on projects, programs and policies. They should also request that benchmarks be adopted to mainstream the Participation Action Plan.

4.8. Economic stabilization and adjustment should have as their central objective to reduce poverty and to prepare the ground for poverty eradication and for equitable and sustainable development. This means practical commitment to programs and policies that will increase access for the poor, especially women, to assets, land, affordable credit, information, protection from extortion and monopsony, technology, skills and marketing services.

4.9. Structural adjustment policies should aim at enhancing rural and urban food security. In addition, these programs should guarantee that no-one be denied basic education, health services, adequate water supply and housing; basic services should remain free to the poorest; charging fees should not be considered unless an adequately funded safety net is in place. Trade with neighbors in the region, diversification and the expansion of processed exports should all be promoted rather than discouraged. It is crucial to focus on reactivating and strengthening the domestic economy by promoting domestic investment and redistributing income and access to productive resources.

4.10. Favorable international economic conditions for SAPs to work and benefit the poor do not exist and must be created. The debts of developing countries, unfair trading conditions, distortions and inequities in international flows, remain outstanding obstacles to progress. The Bank's initiative of a Multilateral Debt Facility (being discussed previously to the October meetings) should be strongly supported. Pressure on government officials should stress that the MDF does not imply full cancellation, reduction or write-off of multilateral debt, but rather a type of rescheduling which will effectively decrease the stock of multilateral debt of some of the poorest developing countries. Strategically, pressure for measures to reduce and cancel commercial, bilateral and multilateral debt should be continued.

4.11. Global environmental problems can be mostly traced to over-consumption and the wasteful use of natural resources in rich countries and to widespread poverty in the South. The Bank should requested to produce a report on the reforms needed by industrial countries which are necessary if SAPs are to succeed, including a redistributive reform of international economic relations through:

4.11.1. changes in the production and consumption patterns of the Northern countries;

4.11.2. efforts to create a fairer, which is often not a synonym of a freer, world trading system;

4.11.3. regional trading arrangements that maximize complementarity, and help countries produce goods that their neighbors want;

4.11.4. international legislation and efficient international institutions to regulate the activities of transnational firms and banks, and to curtail unethical, illegal and ecologically damaging activities.

References

NGO Working Group on the World Bank, The Challenge of Poverty Eradication, Working Document, Geneva, 1994; Chapter III, Alternatives to the World Bank, in Beyond Bretton Woods, TNI/Pluto, 1995; Percy Mistry, Multilateral Debt: An Emerging Crisis, FONDAD, The Hague, 1994; and EURODAD, Third World Debt in the 1990s, issue n. 13, July 1995, Brussels.

5. NGOs WORKING ON RDBs -

The most organized NGO movement on RDBs is the NGO Working Group on the ADB, based in Manila. This network has been working on both the national member-governments and the ADB Administration. They have opened a number of fronts of interaction, which include the Asian Development Fund (areas for improvement and performance indicators), confidentiality and disclosure of information, energy, forestry, indigenous peoples, resettlement, agriculture and natural resources, women and population, debt relief, Civil Society Fund. A lobbying strategy has been established and is being carried out in the whole continent, involving NGOs in Europe and the USA. Other continents have not developed such a comprehensive approach.

Most of the issues just mentioned are relevant in the other two regions of the South. I lack time and space to go into detail about the possible strategies related to each RDB. Since ANGOC recently produced a valuable text (Antonio Quizon, The ADB Campaign: Practical Lessons for Social Activists), I will focus on the main lessons emerging from it, which can be summarized as follows:

5.1. give primacy to local communities and to concrete work on the ground, and work in their best interest;

5.2. build a movement or a network, not an organizations; rather, keep an overall strategy that remains as inclusive as possible; members vote themselves in or out depending on their actual work and condition;

5.3. attend and focus key activities at the Annual Bank Meetings, for it is the only occasion which brings together all the Bank's stockholders and most stakeholders—Finance Ministry officials of member-governments, Bank officials and staff, private banks and investors, prospecting sub-contractors and international media;

5.4. hone communication skills;

5.5. find natural allies within the Bank, but always keep a professional distance;

5.6. utilize vital information said in conference, but always respect and protect confidential sources;

5.7. involve the affected communities directly in Bank dialogue, for officials can never ignore it when the communities themselves speak out;

5.8. the Bank is most vulnerable and is most likely to listen when its own budget is on the agenda, such as during discussions for capital replenishment; heighten the campaign for reform during such occasions;

5.9. explore possible actions through governments; use the democratic space available in other countries to reinforce the cause;

5.10. combine meetings and dialogue with other forms of pressure, including public rallies and other forms of local resistance;

5.11. always see the specific issues, moments and subregions in the broader context of the system as a whole, the processes and the region;

5.12. present concrete demands, not just complaints, always pinning down demands on specific actions;

5.13. always insist on putting down all agreements in writing.

6. ISSUES GIVEN INSUFFICIENT FOCUS include:

6.1. gender impacts of IFI funding, international currency speculation, various forms of corruption (illegal flows related to intrafirm transfer pricing, capital flight, capital migrations to avoid taxation, various forms of dumping, cartelization, etc.).

6.2. Systematic NGO work on international trade and the recently created World Trade Organization (WTO). Support should be given to the initiative of the Swiss Coalition to establish an NGO-WTO Forum to facilitate collaborative global action towards a fairer international trade system.

7. AN INTEGRAL APPROACH TO DEVELOPMENT

should serve as the broad contextual reference for NGO and PO strategy on IFIs. The lack of such a reference has led to fragmented approaches, weaker leverage and absence of strategic vision to guide specific action.

7.1. In designing strategy to deal with IFIs, it is crucial to put them in the broader context of the struggle for a deep structural, institutional and relational reorganization of the global economic and financial system itself, and the establishment of people-and community-centered forms of development, from the bottom upwards, and from the local towards the global spheres.

7.2. To include both more plentiful and better quality international aid, and proposals for overcoming the factors of impoverishment and maldevelopment, in the agenda of interaction with the IFIs.

7.3. To target pressure on policies to redistribute wealth and access to resources, both nationally and internationally, as preconditions for demand for international aid gradually to be replaced by various forms of domestic productive investment.

7.4. Jointly to work out strategic proposals for the transformation of international relations, including reforms of the international financial, trade and investment systems, regulation of TNC operations, flows and transactions, concrete forms of support to national, subregional and regional experiments of people-and community-centered development; the 1992 Rio Forum produced NGO Treaties on some of these issues, but they have largely been lacking coordination and strategy; the Treaties could serve as a leverage for NGOs and POs to redesign their action and implementation strategies.

7.5. To design a globally-articulated strategic action plan focusing on alternative policies to deal with the vicious circle of indebtedness (including multilateral debt) and alternative adjustment policies; some specific proposals can be found in the book Beyond Bretton Woods: Alternatives to the Global Economic Order [TNI/Pluto Press, London, 1994], especially in the Chapters by W. Bello, S. Kothari and M. Arruda.

7.6. To pressure IFIs to deal with the dilemmas created by technical progress, growth and strides in productivity and profitability associated with structural unemployment by addressing the need:

7.6.1. to value human labor independently from salary-related employment;

7.6.2. gradually to overcome wage-labor;

7.6.3. to devise new forms of citizens’ remunerations associated with the virtually unlimited potential for creative uses of their labor power, and with new, more democratic forms of ownership, control and management of production, finance and trade.

7.7. To pressure IFIs towards conceiving economics not as an end, but as a means for achieving social and human development and progress; this requires simultaneous action to reduce and alleviate poverty and other social problems through compensatory programs, and a strategy to restructure the national and global economies towards self-reliant forms of economic, social and human development.

Footnotes

1) Text prepared with the support of Canadian MDB Coalition as a contribution to the NGO strategy meetings to be held in Washington DC, October 1995.

2) Economist and educator, coordinator of PACS - Institute of Alternative Policies for the Southern Cone of Latin America (Rio de Janeiro), Chair of the ICVA Commission on Sustainable Development (Geneva) and fellow of the Transnational Institute (Amsterdam). Former coordinator of the NGO Working Group on the World Bank (Geneva).

3) Forum of NGO and Social Movements Operating in Rondonia, Letter to the Inspection Panel, June 20, 1995.