Fostering trust in World Bank trust funds through accountability

In July, the House Financial Services Committee moved a bill containing reforms to foster accountability at the World Bank, where the United States is the largest shareholder.

The bill concerns the United States’ contribution to the International Development Association, through which the World Bank makes loans to poor countries. The World Bank Accountability Act, introduced by Rep. Andy Barr (R-Ky.), makes 15 percent of that contribution contingent on overdue institutional reforms.

These reforms include changes in incentives for staff to ensure performance is tied to outcomes rather than lending volume, improved measures to prevent gender-based violence, and accountability for the bank’s trust funds. In the markup hearing, Rep. Jeb Hensarling (R-Texas) acknowledged that, “The World Bank in some instances has contributed and exacerbated poverty as opposed to remedying the problem…There has to be some level of accountability here.”

It is heartening to see Congress considering conditions to ensure funding allocated to the World Bank protects human and environmental rights. Debate on the bank’s gap in accountability for trust funds is long overdue, and we welcome efforts to close these loopholes. As lawyers for people seriously harmed by international finance, we have seen first hand why these reforms are needed.

Take the case of Haiti in 2015.

Foreign gold mining companies only began to show serious interest in Haiti about seven years ago, but their activities have already led to questionable land deals and prompted local communities to fear them. In northwestern Haiti, local community members have stories of foreign companies stripping their land rights using nefarious tactics: papers delivered to landowners already bearing their signature, illusory promises of new hospitals, and requests for illiterate villagers to “sign” agreements with a fingerprint.

Gold mining is always risky for locals and the environment, and Haiti’s limited water resources, lack of infrastructure, and susceptibility to earthquakes only heighten the danger that large-scale gold mining will cause serious harm that outweighs any short-term financial gain.  Add to this ongoing problems with Haiti’s governance, and plans to develop a mineral mining sector in Haiti seem destined to leave Haitians in the dust.

To have any hope of bringing benefits to Haiti, the mining industry would require strong regulations, competent and well-resourced government agencies to enforce them, meaningful dialogue with affected communities, and access to effective complaint mechanisms when problems arise.  What better way to ensure this happens than to solicit advice from the World Bank, an institution that prides itself on the social and environmental standards and accountability it brings to its operations?  

The World Bank indeed supported mining in Haiti by helping the government draft a new mining law aimed at attracting foreign mining companies. But it chose to do so without applying any of its social and environmental safeguards to finance that support, instead channeling its support through unaccountable trust funds.

This astounding decision was made possible by a loophole that lets the bank avoid its safeguard policies when using certain types of trust funds, even where there are serious human rights and environmental risks. The bank has refused to commit to closing this loophole. The bank does not even acknowledge there is a problem.

Think about that for a moment.  When helping to develop a new mining sector in Haiti – a sector known for its risks in the poorest country in the Western Hemisphere – the bank decided there was no need to apply its own rules designed to protect people and the environment.

The World Bank often touts the value of its social and environmental safeguard policies, which are meant to ensure that bank assistance actually leads to the positive development outcomes and sustainable poverty reduction that it advertises.  But when the bank helps to develop a fledgling mining sector in a vulnerable country like Haiti without applying any safeguards, it begs the question: what value does the World Bank bring?

 In this time of shifting global actors and competing leadership, the World Bank should be redoubling its commitment to sustainably reduce poverty, ensuring the most vulnerable do not bear the brunt of destructive projects. As a first step, the bank must close loopholes that allow high-risk activities to go forward without safeguards.

 We want to applaud the committee for being bold enough to explore ways to make the World Bank more accountable for its promises to end extreme poverty. We encourage committee members to continue the conversation with other members of the House and remain hopeful that the Senate will soon consider these reform ideas.

The views expressed by this author are their own and are not the views of The Hill.