Conditionality inserted in order to support Recipients’ Governments and attract

Governments in order to pass reforms or to implement certain practices, when the opposition is strong or when the measure is unpopular.²⁸⁰ It can also be used as an instrument of political stability, whereby a Recipient’s Government can ensure that a reform will be sustained by its successors over time because the reform is part of the conditionality package.²⁸¹ Finally, the conditionality can be inserted to signal to others that a reform or a certain practice is going to take place and will be maintained over time.²⁸² Regarding environmental and social conditionality, it allows for the Recipient to implement certain practices which may differ from the requirements foreseen by national law, even if unpopular. Furthermore, the fact that the Bank is involved in a project and its safeguards are being used serves to attract co-financers who trust that a certain level of environmental and social practices will be implemented. Here, it is interesting to note that the preferences of the Recipient’s Government can meet the preferences of the Donor.²⁸³

278 OECD, James Puzel et al., “Do No Harm: International Support for Statebuilding” (Paris: OECD Publishing, 2010).

279 Macekura, Of Limits and Growth, op. cit., pp. 205-218.

280 Killick, Gunatalika, Mar, op. cit., pp. 14-16.

281 Collier, Guillaumont, Guillaumont, Gunning, “Redesigning Conditionality”, op. cit., pp. 1401-1402.

282 Ibid.

283 Killick, “Donor Conditionality and Policy Reform”, p. 284.

3.7. The six objectives of insertion of conditionality: brief analysis of the preferences in the agency relationship

107. Throughout these six objectives, it is possible to evaluate the weight of the preferences of the principal (the Donor) and of the agent (the Recipient) and to deduce the potential degree of aversion²⁸⁴ or resistance of the Recipient to conditionality due to a violation of its sovereignty. The Recipient’s aversion is stronger where the preferences of the Donor dominate, for instance when the environmental and social conditionality is inserted in order to answer the pressure of some Bank Member States’ constituencies. Moreover, the aversion is logically non-existent when the preferences of the Donor correspond to those of the Recipient, for example when the objective of the conditionality is to support the Recipient’s Government, which itself “owns” the conditionality. Obviously, the conditions are negotiated between Donors and Recipients²⁸⁵ and the degree of aversion will vary on a case-by-case basis, as the Recipient determines to what extent its preferences concur with the preferences of the Donor.²⁸⁶ The degree of aversion is particularly variable when the objectives of the conditionality are those such as increasing aid effectiveness or inducing a reform, which can correspond or not to the Recipient’s preferences. As explained in Chapter Five, aversion can be linked to the resistance of the Recipient to the conditionality’s implementation.

108. As a loan agreement entails numerous conditions, an analysis of the degree of aversion to each condition of the agreement can help define whether a whole development program can be perceived as being owned by the Recipient or as an infringement of the Recipient’s sovereignty. Indeed, as mentioned above, a project is considered as being “owned” by the party whose preferences dominate overall, whether it is the principal or the agent.²⁸⁷ Again, given the power imbalance not only between Donors and Recipients but also amongst Recipients, it is likely that the preferences of the Recipient may concur more frequently with the Donor’s when the Recipient has a stronger bargaining power.²⁸⁸ For instance, a recent

284 Ibid., pp. 283-284.

285 World Bank, Operations Policy and Country Services, Review of World Bank Conditionality, Background Paper 1, op. cit., p. 15.

286Killick, “Donor Conditionality and Policy Reform”, op. cit., pp. 283-284.

287 Ibid., p. 283.

288 For an interesting presentation of Recipients’ negotiation strategies, see Lindsay Whitfield, Alastair Fraser,

“Negotiating Aid: The Structural Conditions Shaping the Negotiating Strategies of African Governments”, 15 International Negotiation (2010), pp. 341-366.

study has shown that the World Bank includes less conditionality in projects where the Recipient is also assisted by China,²⁸⁹ maybe because of competition between Donors.

109. Finally, it is important to note that conditionality often results from the combination of different objectives. For instance, a World Bank condition on the management of a forest ecosystem²⁹⁰ can originate in the objectives of ensuring the responsible use of the aid, answering the pressure of the Donor’s domestic constituency and supporting the Recipient’s government and attracting funding. This creates logically a more complicated aversion/ownership nexus.

289 Hernandez, “Are ‘New’ Donors Challenging World Bank Conditionality?”, op. cit., pp. 529-549.

290 World Bank, “Operations Manual”, op. cit., OP 4.36.

110. Graph 2: Objectives of conditionality: from Donors’ preferences to Recipient’s preferences.

A general matrix of the preferences in the agency relationship regarding each of the six objectives for the insertion of environmental and social conditionality is proposed schematically below.

The matrix goes gradually from the domination of Donors’ preferences and the likely violation of Recipients’ sovereignty to a shared preference between the Donor and the Recipient at the tip of the arrow. A Recipient’s aversion to the conditionality decreases according to the placement of each objective along the arrow, while its ownership increases.

From Donors' preferences

Answer the pressure of domestic constituency in Donor States

Select a Recipient

Induce a reform

Ensure the responsible use of the assistance in the absence of public scrutiny

Increase aid effectiveness

Support Recipients’ Governments To Recipients' preferences

4. Environmental and social safeguards within classical criticisms to conditionality