D E V E L O P M E N T
One of the world's oldest development models tells us that if we give a man a fish, he'll eat for a day, but if we teach a man to fish, he'll eat for a lifetime. But, just how do you determine whom to teach? And how will the fish be distributed? What if the people you're teaching don't like fish? And suppose the fishing methods lead to the destruction of his pond? These are the kinds of the questions which have emerged to confront the world's international financing institutions (IFIs), particularly in the last decade. While the major institutions, namely the World Bank, the International Monetary Fund, and the Development Banks, have tacked away from the historically destructive large-scale project investments, the legacy of environmental devastation and detrimental social effects lingers like the smell of fried fish in the kitchen.The lessons learned from much-maligned initiatives like the World Bank's road-building project in Polonoroeste, Brazil and resettlement programs in Indonesia, which caused unprecedented environmental damage, social upheaval and eventual economic strains, have taught governments and the multilateral development banks (MDBs) to consider more than just the bottom line. The economy versus environment scheme seems to have at last given way to a new concept of sustainable development which promises to more fully account for social and environmental costs.
The major institutions have gone to great lengths to acknowledge problems and underline their new emphasis on sustainable investments. At the Annual Meeting of the World Bank/IMF Board of Governor's held in Washington this autumn the bank readily admitted to weakness on environmental issues. Andrew Steer, director of the environment department, said "The bad news is that we're still learning a lot and there are some things we don't do very well." However many observers acknowledged that great strides have been made with regard to the environment and social concerns by the institutions.
This year in particular saw the annual meeting of the Environmentally Sustainable Development (ESD) Conference recognized as a serious attempt by the institutions to reach out to environmental and social constituencies. The ESD proposed program on Rural Well-Being, which would incorporate environmental and social aspects into agricultural projects, received considerable attention in the World Bank agenda and special endorsement by World Bank President James Wolfensohn. In addition the number of active projects in the Bank's portfolio which are targeted for the environment has grown to 137 in 62 countries and represents investments of 10 billion USD.
The European Bank for Reconstruction and Development (EBRD), established in 1990 to help rebuild the economies of Central and Eastern Europe, became the first multilateral development bank to make sustainable development one of its fundamental goals. The environmental mandate which commits the EBRD to promoting three broad objectives: environmentally sound development; democracy building; and transformation to market economies spurred great hope among CEE NGOs that EBRD would become the first "sustainable" development bank.
A hope which many greens feel has yet to be fulfilled. A recent report by the Center for International Environmental Law (CEIL) claims that after five years, the EBRD is still not living up to its mandate. The report calls for the bank to develop a clear policy for sustainable development in the region and to engage in "on-the-ground change in its policies and loan portfolio." Despite its criticism however, CEIL did state that EBRD may be in the best position to become an environmental leader in the development field.
In November, the EBRD announced revisions to its environmental policies and procedures which bolster the bank's commitment to "identification and financing of environmentally proactive measures such as cleaner technologies, resource and energy efficiency and waste reduction." In addition, the EBRD's projects will now be structured to meet either national or EU environmental standards, whichever is more stringent.
While environmentalists have applauded the MDBs' funding of more environmental projects, they remain to be convinced that key environmental considerations will be incorporated into the basic national economic policies as well as the MDBs' development strategies. Among the most fundamental criticisms is the banks' reliance on development strategies which are centered on the implementation of structural adjustment programs (SAPs). Structural adjustment aims to create free markets and open trade conditions. In theory these policies should improve the balance of payments in indebted countries and promote non-inflationary growth by reorienting investment priorities and increasing exports.
Central to the controversy over SAPs is that for many debtor countries this policy change is not always voluntary. Some of the requirements including the elimination of food price controls and agricultural subsidies, government wage setting and privatization of enterprises also have the distinct potential for causing intense social suffering through increased unemployment and poverty.
In addition, the MDBs' accounting methods rely primarily on the "economic rate of return" for the justification of projects. This emphasis on profitability provides the necessary financial rewards for investors but for the most part ignores environmental and social costs. Furthermore, often the projects which make the best investments from a financial standpoint focus on the most ecologically sensitive areas. For instance, most projects in CEE are in energy, transport and agriculture and rural development.
While there has been some effort to support more environmentally-friendly investments in these areas, such as the World Bank's funding for less-polluting buses in Budapest and a general decrease in funding for nuclear energy in the region, there are serious indications that the institutions are funding development which will repeat the mistakes of the West. According to the CEE Bankwatch Network, a collaboration of ten NGOs in nine countries in the region which monitor the activities of the financing institutions, IFI loans to the transport sector are focusing on roads and the auto industry with inadequate attention to railways or public transportation; while loans to the energy sector concentrate on energy supply with few investments in energy conservation or renewable resources. "They say they want to support sustainable development, but they are funding the wrong types of projects," says Eniko Szemanik, the Bankwatch coordinator for Hungary. "And, the whole issue of consumption is never addressed."
Finally, the spiraling debt which these developing countries incur to "catch up to the West" leads many social and environmental advocates to beg the question "economic growth at what cost?"
For their part the MDBs stand by their policies and maintain that countries are better off. "If the overarching goal of development efforts is to reduce poverty, then solid economic growth is an absolute necessity," says John Clark, head of the World Bank's NGO relations unit. "However, we must be more attuned to how the benefits of growth are distributed." World Bank president James Wolfensohn is also a strong supporter of the market economy writing in an Earth Times report that "market led growth in developing countries is a great boon for their people."
The NGO camp has been long divided with regard to the effects and effectiveness of the development institutions. Since the 1980's one group led by some of the largest international organizations like Oxfam-UK and the World Council of Churches has supported a "reformist" policy towards the World Bank in particular, while a second grouping largely made up of US environmental organizations has been far more critical, calling for a complete overhaul of the institutions or their closure.
Despite the diversity of their concerns, however, most NGOs agree on certain elements of reform. They complain that while the institutions claim to embrace an open and sustainable policies, their commitment should be evident in all that they do: not just a few targeted projects, but in their policy advice, their assessments and their design of the international development agenda. In particular NGOs are calling for fundamental changes for increased transparency and accountability, effective poverty-alleviation and environment conservation, and a greater role for citizens.
The NGO voices are being heard in this respect and most of the institutions are making efforts particularly in the areas of transparency and access to information. The World Bank is leading the way by providing project information documents for most funded initiatives. In 1994 it established a Public Information Center to provide greater access to bank information including project appraisals and country reports and an Independent Inspection Panel has been established to review World Bank projects and procedures.
Both the World Bank and the EBRD have policies requiring Environmental Impact Assessments for some projects, but environmentalists claim that classification systems allow too many proposals to avoid the requirement and they do not adequately involve citizens in the process.
Participatory development has been a subject of increasing exchange in recent years and is now seen by all sides as essential to further improvements in sustainable development. Participatory development is defined as a process through which stakeholders influence and share control over development initiatives. Stakeholders for the most part represent those people who are expected to benefit from or conversely who could suffer from development projects.
NGOs have made considerable in-roads and are seeing increasing opportunities for dialogue with the institutions, at the World Bank in particular. NGOs now regularly host parallel sessions at the Bank's annual meeting of member country financial ministers and the level of NGO involvement in World Bank projects has increased from around five percent in 1988 to almost 50 percent in 1994. This year's EBRD Annual General Meeting in Sofia also hosted an NGO assembly which began with a 90 minute session with top officials including EBRD President Jacques de Larosiere.
But NGOs feel their opportunities for involvement are superficial at best. While they can express their concerns about issues such as operation design, including locations, technological choice and timing, their voices are less clearly heard when it comes to the initial decisions such as whether there is a better alternative to a proposal or whether a project should be undertaken at all. In addition, while most of the banks have policies to allow public access to information, NGOs find the process cumbersome and inadequate. Eniko Szemanik explains, "If you don't have access to the Internet it's difficult, most of the local or regional offices do not have the information we need on hand, and we are often charged for the information which presents a real burden for some NGOs."
"There is something fishy about Ôbankers' pretending to be NGOs," says Mr. Abdlatif Al-Hamad, Chairman of the Development Committee, Task Force on Multilateral Development Banks. In a report to the Oversees Development Council, an independent research facility which monitors international development, Abdlatif stated that while it is unfair to characterize the MDBs as mere bean-counters worrying about profits it's also unrealistic to expect them to don overalls and "work at the elbows of farmers and small entrepreneurs around the world. They need to inform their work by direct contacts with the poor and the institutions on which they depend. But they remain intermediaries. They cannot pretend to have - or be measured by - ambitions which only national governments and local communities can reasonable set for themselves."
Reliance on national governments is like cod-liver oil to CEE NGOs - a tough medicine to swallow. National laws on citizen participation in the region remain inconsistent, and are not enough to ensure adequate participation in development policies.
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MDBs projects by sector in CEE Countries (IBRD, IDA, IFC, EBRD, EIB) Total: USD 28.885 million 
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Transport projects by sector in CEE (IBRD, IDA, IFC, EBRD, EIB) Total: USD 4,815.12 million 
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Energy projects by sector in CEE (IBRD, IDA, IFC, EBRD, EIB) Total: USD 4,887 million 
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