300. This dissertation assumes that the Bank’s environmental and social safeguards are vectors for the exportation of sustainable development. However, as presented above and illustrated in the case studies, there are no doubts that this exportation entails many difficulties. The World Bank IEG reported in 2010 that most projects were correctly appraised and categorized and entailed adequate consultation and disclosure, while supervision was often deficient and only 58 percent of mitigation plans were correctly implemented by Borrowers.1010 These findings illustrate the layers of responsibility in the implementation of conditionality. On the one hand, the Bank can encounter problems with the implementation of selectivity conditionality and, even more so, with the supervision of performance conditionality. On the other hand, the implementation of selectivity and performance conditionality by the Borrower can also be problematic. Furthermore, noncompliance of one of the parties is often linked to noncompliance of the other. This noncompliance can be linked to the three groups of criticisms of conditionality: vicious circle of noncompliance, ineffective conditionality and inadequate design for the context.
This last chapter aims at taking these criticisms into account and proposes solutions in order to make the safeguards more effective vectors of sustainable development.
1. Institutional reform as a solution to the vicious circle of conditionality noncompliance
301. Problems of noncompliance are often linked to the institutional organization of the Bank. The conflicting incentives for the Bank staff (compliance with environmental and social safeguards versus the disbursement pressure) as well as time and resource constraints1011 are major impediments for the implementation of environmental and social safeguards.1012 This has been highlighted in the Dinant case study, where the CAO denounced the fact that results defined in financial terms may incentivize staff to violate environmental and social safeguards.1013 Bank reports have also underlined weaknesses in the supervision of environmental and social safeguards during projects implementation. The
1010 IEG, Safeguards and Sustainability Policies, op. cit., pp. 20-21, 38, 47.
1011 Ibid., pp. 31-32.
1012 See for instance Svensson, “Why conditional aid does not work”, op. cit., p. 383; Ebrahim, Herz, “The World Bank”, op. cit., for instance p. 58; Bugalski, “The Demise of Accountability”, op. cit., p. 55.
1013 CAO, “CAO Audit of IFC Investment in Corporación Dinant”, op. cit., pp. 45, 59.
IEG has explained that there is:
(...) much better attention to safeguards and Performance Standards in project preparation and appraisal than during supervision. This is partly a function of the front-loaded nature of the policy frameworks, which have more detailed instructions and explicit standards for compliance during project preparation than during supervision. As a result, the Bank’s Management earmarks funds for safeguards work with designated teams of specialists to ensure compliance during project preparation but not during supervision.1014
302. The conflicting interests have also been illustrated in the KEE case. The decision not to categorize the Maasai as indigenous peoples may have stemmed from a desire by the staff to avoid further negotiations with the Borrower and consequent delays. From the perspective of traditional criticisms to conditionality, conflicting staff incentives can translate into the vicious circle of noncompliance, where conditionality is not complied with by either party and with no consequence for the noncompliance.
1.1. Organization reform within the Bank regarding staff incentives, communication and resources
303. These major issues can only be reversed by institutional measures, which would orient the Bank’s operations towards social and environmental sustainability on an equal footing with the organization’s quest for economic sustainability. Only if the integration of sustainable development is reflected throughout the organization of the Bank will it be possible for the safeguards to effectively function as a vector. The first fundamental measure would be to include clear incentives for the whole staff to comply with the safeguards, accompanied by an allocation of adequate resources during project appraisal and supervision. Training and incentives will reverse the perception that environmental and social staff hinder the swift implementation of projects. The crucial role of the accountability mechanisms must be communicated. Efforts must also be made to preserve and reinforce their mandates, especially the Inspection Panel’s, with the UBESF. As part of this effort, adequate resources must be committed for capacity-building in order for the Borrowers to correctly implement safeguards.
1014 IEG, Safeguards and Sustainability Policies, op. cit., p. 17.
1.2. Institutional application of safeguards as binding rules
304. Secondly, the safeguards need to be implemented as binding rules, according to which conflicts of interests shall be resolved, as opposed to policies to be negotiated depending on the powers at play in the respective conflicts of interests.
305. The Bank’s constant interpretation and application of environmental and social conditionality in the selection and implementation of projects must provide a framework that balances the need for financial results in risk areas. It is therefore possible to add a seventh objective to the insertion of conditionality presented in Chapter Two: conditionality as a tool for resolving conflicts of interests. This objective in fact limits the Bank staff’s autonomy. This framework of limitation of autonomy should be considered the first mechanism for resolving possible conflicts of interests. It should diminish the need for accountability mechanisms’ investigations, and, when needed, simplify their work. As seen in the Dinant and the KEE cases, when reaching the accountability mechanisms, important damages can already have been borne by affected communities. Furthermore, despite their crucial role in environmental and social issues, these are not judicial institutions.
Meanwhile, the constant interpretation and application of environmental and social conditionality allows for the resolution of conflicts as they appear, at the time of selection and implementation of projects. In a context of increasing investment in risk environments, environmental and social conditionality provides a framework that balances the need for financial results. This conditionality makes it possible to achieve the objective of the Bank of integrating social and environmental protection into projects that occur even in situations of particular risk and avoid falling into the vicious circle of noncompliance.
2. Harmonization as a solution to the ineffectiveness of conditionality
306. Problems of noncompliance are also linked to the fragmentation of environmental and social safeguards amongst MDBs. The aid effectiveness agenda has advocated for the harmonization of Donor practices in order to make international development cooperation more effective. This should be reflected in environmental and social conditionality.
2.1. Adoption of a managerial approach
307. Safeguards are not yet harmonized despite a trend toward convergence. A same investment with different co-financers can trigger the application of different sets of
safeguards which multiply the difficulties for Borrowers. In the end, conflicting decisions could be adopted by different accountability mechanisms. MDBs and other financers seem to be aware of these difficulties, as illustrated in the KEE case. MDBs should be encouraged to take a managerial approach to deal with this type of potential fragmentation, such as the use of one co-financer’s safeguards for the whole investment as well as cooperation in safeguards implementation, including dispute resolution. This managerial approach should be formalized in order to create a predictable framework.
2.2. Implementation of a Human Rights-based harmonization
308. There are clear difficulties for the Borrower to implement conditionality with which it is not familiar. As illustrated in the KEE case, a resettlement according to World Bank safeguards is a very delicate exercise, even more so when it differs from national law.
Therefore, conditionality shall be harmonized across MDBs in order to provide a predictable framework. There are conflicting views on whether and how this harmonization should occur. The dissertation advocates for a Human Rights-based harmonization, because it is grounded in Human Rights law which should oblige the Member States and the World Bank Group institutions, as specialized agencies of the United Nations. Safeguards are part of an international emulation dynamic which seems to reinforce environmental and social protection. Moreover, there are trends that show a convergence between MDB safeguards, particularly amongst the World Bank Group. Human Rights concepts are imported, such as the indigenous peoples’ FPIC in the new World Bank safeguards. However, this importation or “appropriation” should not result, in practice, in the operational distortion of these norms and, in the end, in a “race-to-the-bottom”.
309. The competition between MDBs and the possible “race-to-the-bottom” triggered by emerging development banks cannot be a factor of influence. Indeed, the World Bank is bound by Human Rights, as explained above. Furthermore, the Bank’s safeguards do participate in the reputation of the Bank as a responsible lender and attract co-financers.
3. Assessment of the context as a solution to the inadequate design of conditionality 310. Authors have described the implementation difficulties of conditionality when it is not adequately designed for a given context. Disagreement with the Borrower as to the application of safeguards and lack of information on the context jeopardize compliance with
safeguards. The resistance of Borrowers renders the implementation of environmental and social safeguards particularly difficult and increases the Bank’s internal conflicts of interest.
Resistance also relates to the question of ownership and sovereignty, which is pervasive in development cooperation, when the preferences of the Bank do not align with the preferences of the Borrower. But again, rather than being the object of this type of conflict, conditionality must be an instrument for its resolution, as exposed above, this time between Donors and Borrowers.
3.1. Strict assessment of the general context for the compliance with environmental and social conditionality
311. Because environmental and social safeguards are the object of a legal transplant, the Borrower’s context must be assessed in detail by the Bank’s staff, including elements described in the law and development literature, such as economic barriers, a violent political context, governance or cultural factors. The KEE and the Dinant cases show that particularly risky contexts make the implementation of environmental and social conditionality immensely difficult. Here, the analysis of the context for project implementation is crucial. At the appraisal stage, if the context is unsuitable for the implementation of the environmental and social safeguards, whereby the Borrower is unlikely to comply, the project should be modified in order to ensure compliance. Some aspects of the project may need to be dropped, others perhaps added; the loan agreement should be drafted on that basis.
312. The strict analysis of the context for safeguards implementation is still useful during project implementation. First, it provides inside knowledge on national political issues and views to the Bank, as well as on their potential impacts on the project. It opens a space for discussion for the potential adaptation of local practices and regulations to comply with the safeguards. Therefore, it supports the application of the safeguards at each step of the project’s implementation.
313. If, at the appraisal or implementation stages, the context appears to be highly unsuitable for safeguards implementation, the project shall not be approved, or, respectively, canceled.
Again, the safeguards should solve the conflict between the need for project approval and funds disbursement versus the implementation of sustainable development.
3.2. The assessment of the Borrower’s potential resistance to safeguards implementation 314. It is the very function of the safeguards as vectors that represents the main issue for Borrowers. Indeed, in order to be implemented, the safeguards reach into and supersede domestic law. When the preferences of the Bank and a Borrower diverge on environmental and social issues, attempting to nevertheless export the safeguards amounts, in fine, to an infringement upon sovereignty and will most probably be met by resistance and noncompliance. As illustrated by the Matanza-Riachuelo case, lack of political will hinders implementation of a project’s environmental and social safeguards: if sustainable development is not owned as part of a Borrower’s agenda, the Borrower is unlikely to comply with social and environmental safeguards.
315. The dynamic of safeguards exportation cannot be deprived of an important factor: the power asymmetries in international relations. But when analyzing the potential resistance of a Borrower to the implementation of safeguards, power asymmetry is not the only element the Bank staff needs to assess. Indeed, the participation of the Borrower and its constituency in several phenomena, such as the gradual acceptation of the sustainable development principle, the pressure from environmental NGOs and the institutional changes shall also be examined. For the new World Bank safeguards, the views manifested by the Borrower in the consultation phase can also prove revealing. If, according to all these factors, the Borrower is likely to resist the implementation of safeguards, or if resistance is voiced by the Borrower1015 at the time of application of selectivity or performance conditionality, projects should be modified in order to further compliance or abandoned. In addition to the violation of sovereignty, the costs of attempting to export safeguards in such a context – such as excessive delays, project failures, Human Rights violations and reputational damages for the Bank – are too high.
316. The UBESF in the new World Bank safeguards is an attempt to solve the sovereignty / resistance issues. But this interesting initiative will still require striking a balance between sovereignty and sustainable development, because the World Bank still needs to assess the Borrower’s framework. The dissertation advocates for a restrictive Use of Borrower’s
1015 Sarfaty, “The World Bank and the Internalization of Indigenous Rights Norms”, op. cit., p. 1806.