Issues and Debates
These include:
- conditions attached to loans, programs and projects
- undemocratic decision-making structures and processes
- bureaucratic structures
- social and environmental impacts of projects
Conditionality
A long-standing issue surrounding aid from multilateral development banks (MDBs) is what is known as conditionality. Conditionality refers to the conditions attached to aid money dispersed from MDBs like the World Bank and the Asian Development Bank.
While the conditions imposed on aid-recipient countries vary, common examples of the types of conditions in loans provided by MDBs include:
• Cutting back on public spending and reducing the size of government departments and services. This is often concentrated in areas such as health and education where costs are high. This has major impact on people’s access to health care and schooling, particularly among the poorest.
• Privatising key sectors of government and public services. Countries have been required to privatise key sectors such as water provision, essential infrastructure, hospitals, electricity, and transport. This puts control of key sectors into private (and often foreign) hands, which may not have the best interests of the country in mind. This has often resulted in the inequitable provision of key services as private providers tend to prioritise servicing of areas that are profitable.
• Lifting essential subsidies. In many poor countries governments subsidise essential items such as rice, grain, oil, and even petrol. They do this so that the prices of essential items do not prohibit people from meeting their daily needs. Sometimes governments are required to lift these subsidies which can lead to increases in prices of essential items, making them unaffordable for many people.
Last updated 12 November 2010
Undemocratic and Bureaucratic
Undemocratic decision-making
Multilateral development banks have been criticised for being undemocratic due to the disproportionate power and influence wealthier member countries have in decision-making. Since voting power is weighted according to the financial contributions of member countries, the wealthy countries who contribute more money have the greatest say and influence over decisions at these institutions. For example,
- In the IDA of the World Bank 12 countries control more than 50% of the vote, which is greater than votes held by the remaining 158 member countries;[1]
- In the ADB, seven countries control more than 50% of the vote, which is greater than votes held by remaining than 60 member countries.[2]
While in 2010 the World Bank implemented reforms to its voting power, the Bretton Woods Project notes that high-income countries will still control over 60% of the votes. [link to: http://www.brettonwoodsproject.org/doc/wbimfgov/wbgovreforms2010.pdf]
Furthermore, the ways in which MDBs prioritise and implement programs and projects have been characterised by lack of participation and consultation with local communities and lack of accountability to affected communities.[3]
Bureaucratic culture
A common criticism of MDBs is that they are overly bureaucratic and often prescribe a single set of policies as solutions, without sufficient regard to local needs and contexts. This can result in inappropriate projects and programs which at times can do more harm than good, as demonstrated in the section on conditionalites.
United Nations agencies have also been criticised for taking too long to respond to problems because of their complex bureaucracies, and also that much of the aid money is spent on the salaries of personnel in these organisations rather than on the actual programs and projects.
Last updated 12 November 2010
[1] http://siteresources.worldbank.org/BODINT/Resources/278027-1215524804501/IDACountryVotingTable.pdf
[2] http://www.adb.org/About/membership.asp
[3] For case studies of problem projects funded by the World Bank and ADB, see: http://www.bicusa.org/en/Institution.Projects.5.aspx; http://www.forum-adb.org/inner.php?sec=1&id=2
Social and environmental impacts of projects
Social and environmental impacts of projects
The ability of MDBs to mobilise sufficient funds for large-scale ‘development’ projects is often cited as one of their key advantages. However, their involvement in promoting, funding and implementing large-scale projects has also been a source of controversy.
Firstly, the technical expertise necessary to manage and build large-scale infrastructure has meant that much of the aid money has been channelled to companies, consultants and technical experts that oversee the projects.
Secondly, while these projects may generate revenue and contribute to economic growth, they can also have detrimental social and environmental impacts. For example, the World Bank and ADB have been heavily criticised for funding large dams that have degraded rivers and destroyed local livelihoods.
Whether some of the projects funded by the banks ‘alleviate poverty’ (as the banks claim) or further impoverish populations (as critics claim) is a matter of much debate. For an example from the Mekong Region in Southeast Asia, see Hidden Costs: The underside of economic transformation in the Greater Mekong Subregion