SUNS  4362 Thursday 28 January 1999

Washington, Jan 26 (IPS/Abid Aslam) -- Communities harmed by World Bank projects will find their access to the agency's quasi-independent Inspection Panel severely restricted from next month if the Bank's executive directors vote to shorten the watchdog's leash.

The Inspection Panel opened its doors in 1994 following pressure from non-governmental organisations (NGOs) and the U.S. Congress, who insisted that the Bank's commitment to public accountability was toothless without a unit capable of investigating community complaints - or 'claims', in official parlance - against problem projects.

'Project-affected persons' can file claims if they have been harmed, or believe they will be harmed, by violations of the Bank's social, environmental, financial or loan-supervision policies - but only if
they have failed to get satisfactory responses directly from Bank staff.

In each case, the Panel asks Bank management to respond in writing to the charges, weighs the two contending documents and, if it considers a deeper probe necessary, asks the board of directors for permission to proceed.

Citizens from far and wide have sought justice from the Panel.  They have come from the Himalayan mountains of Nepal, Brazil's Amazon forests, and the Central Indian plains. They have included peasants and fisherfolk forced from their villages and livelihoods to make room for dams, roads and bridges, and jute mill shareholders who said their investments soured because of the Bank's economic advice.

Experience, however, has shown that the inspection unit "is a great instrument in the abstract but, when applied, it becomes very divisive," as then Panel chairman Alvaro Umana told IPS when he
inherited the job in 1997.

The Bank's 24-member executive board is to vote Feb. 9 on proposals to restrict the types of problems claimants can bring before the Panel and to limit the unit's ability to conduct on-site inspections.

Spearheading the attack on the Panel are India, Brazil and other major borrowers, according to board, Bank, and NGO sources. Opposing them are the USA, other major Bank shareholders, and the institution's President, James Wolfensohn, described by two former Panel chairmen as the body's "only friend" during key debates in the past.

The U.S. Congress made establishment of the Panel a condition for renewed support of the International Development Association (IDA), the Bank's donor-funded soft-loan window for the poorest countries. The United States now is seeking similar inspection mechanisms for the
International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA), both members of the World Bank Group. It remains to be seen how forceful a defence of the Panel is mounted by Washington's representative on the board.

Details of the board proposals have yet to be released but borrowing countries' representatives have often complained that Panel probes intrude on their governments' operations. Inspections "should be done in such a manner that the borrowers don't get the feeling that they are under the microscope, being investigated instead of the Bank," Surendra Singh, India's representative, said in a recent news interview.

Bank managers themselves have stoked that discomfort by pinning the blame on borrowers. Case files show that, in at least four inspections since 1996, the 'Management Response' to community complaints highlighted weak local laws, institutions, and government performance.

Rather than shifting emphasis from fault-finding to problem-solving, sources familiar with the proposals say, the board likely will insist that Bank management apportion blame for policy violations between the lending agency and its borrowers. Further, it is expected to forbid the
Panel from investigating breaches of rules attributed to the Bank's client governments.

"It seems ironic that borrowing countries would institutionalise that kind of finger-pointing, except that it does effectively quash project supervision by the Bank," says one NGO source involved in negotiations to open the Panel reform process to public participation. "What the (borrower governments) are saying is, 'If it's our fault, then there's no investigation. The matter stops there'."
Borrowers also may be trying to save themselves some money. To appease critics, Bank staff sometimes offer 'action plans' to fix problems - so long as borrowers take out additional, multimillion dollar loans to finance the efforts. The board has approved these schemes even when they were deemed insufficient by the Panel. Cases include resettlement efforts in Paraguay's second-largest city, Encarnacion, and in India and Brazil.

Sources familiar with the current proposals say they would bar on-site inspections and limit the Panel to conducting 'desk reviews' from their offices at Bank headquarters here. The precedent for this was set in 1997, when executive directors prevented Panel members from returning to Central India to complete an investigation of alleged violations of Bank rules on the environment and resettlement of populations.

Bank management opposed the in-depth probe, which involved coal-fired power plants in the Singrauli region. But the strongest opposition came from Indian authorities and was fuelled in part by conspiracy theories. Officials of the National Thermal Power Corporation (NTPC) told IPS at the time that they feared the Panel was playing into the hands of foreign political and commercial interests, who wanted NTPC opened to foreign buyers.

State-owned NTPC operates three major power plants in Singrauli, a region known as India's 'power capital'. Coal reserves there could be enough to generate one-third of the country's current annual electricity consumption for the next 130 years, Bank documents reveal.

The Inspection Panel has received a dozen complaints since October 1994 and has recommended full-scale investigations in only five cases. Executive directors have quashed or curbed all five probes.
Nevertheless, the unit has forced the Bank to revisit a number of projects, make some changes and, in the 1994 case of Nepal's proposed Arun III dam, to withdraw altogether rather than contribute to a social and environmental disaster of questionable economic merit.

"The board determines whether or not the Panel can investigate a claim," says Lori Udall, environmental lawyer and former Washington-based director of the NGO International Rivers Network. "This means that the Panel ultimately does not have independence." By contrast, noted Udall, in the recently-published book 'The Struggle for Accountability', the Bank's Operations Evaluation Department (OED) also reports to the board but is free to choose which projects to examine.
However, the Panel looks at planned or ongoing projects, while the OED conducts post-mortems of past projects.