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David Shaman

Energy and focus: where transparency and international development have merged in the 21st Century

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It’s time for the second segment in our three-part guest blog series from the author David Shaman. We will run the last blog in this series at the same time next week. You can read the first blog that we published last week here

David is the author of “The World Bank Unveiled: Inside the Revolutionary Struggle for Transparency, an insider’s account of how the world’s largest international financial institution makes decisions. David was the communications manager of the Bank’s Development Economics Research Group on the Environment from 1993 to 2000, where he co-authored “Greening Industry: New Roles for Communities, Markets, and Governments”, a major Bank policy report on industrial pollution in the developing world. He also developed and managed the New Ideas in Pollution Regulation (NIPR) website, which was ranked as the Bank’s best website in 2000. He has also served as a legislative aide to two members of Congress and as a press secretary to a member of the New York City Council.

In 1994, after lending missteps that negatively impacted the environment and indigenous cultures in key developing countries, the World Bank genuflected to an outcry from civil society activists for greater scrutiny by creating a Public Information Center in its Washington headquarters. This step was taken five years after the Bank’s adoption of its first public information disclosure policy. It would be another five years before the Bank opened similar centers in its satellite offices around the world. These new facilities allowed interested citizens to access selected Bank documents and provided them with a more educated perspective on what the agency was doing in their home country. Things are moving a bit faster these days.

Transparency means something different for different actors. What follows then are several visions of transparency that are currently being pursued by development activists. These crusades are often pursued concurrently by the same actors rather than as competitions between them. The following list should not be viewed as comprehensive, but simply as important recent developments or debates now unfolding.

Perhaps the longest standing activity among transparency advocates has been to reduce corruption in poor countries. Corruption devalues the potential impact of development assistance to eliminate poverty and promote growth, but prior to Bank President James Wolfensohn’s 1996 pledge that anti-corruption would garner closer attention during his term the issue had generated little urgency among development officials. Few doubted corruption impacted development, but for institutions such as the Bank where careers were made by funneling monies through the lending pipeline, the issue was unofficially considered taboo. Into this black hole entered numerous civil society groups such as Transparency International that have sought to examine, codify and expose the impact of corruption. Over the intervening two decades, attention has been paid to transparency and reform of procurement processes, corporate sustainability practices, fair and free elections, whistleblower protection and capacity building of public institutions and civil society stakeholders in poor countries. Development banks have implemented internal anti-corruption units and poured resources into making their procurement processes more transparent. Participants suggest there has been progress, but also acknowledge the problem remains immense. We should also acknowledge there is ample evidence to suggest corruption affects all societies to some extent, so it would be naïve to think corruption is a problem plaguing only poor countries.

Piggybacking on the Freedom of Information Act, civil society actors have pressured international financial institutions (IFIs) over the past two decades for greater access to their information products as a means of monitoring their activities. As noted earlier, institutions such as the Bank responded by opening up document centers. Nevertheless, the global economic crisis, the growth of global Internet access and the emergence of social media tools has provided the impetus for important progress over the last few years. In 2009, when the G-20 agreed to invest $1.1 trillion into the IMF, Bank and regional development banks, significant pressure was raised by poor countries that these institutions needed internal reform and needed to share power more equitably between industrialized and developing nations. Thereafter, the international financial institutions acknowledged a need to be more responsive to their stakeholders. In 2010, the Bank revised its Access to Information Disclosure policy to assume all its information is publicly available unless it is specifically exempted. The new policy also provides an appeals process for stakeholders who are denied information. The revised policy reverses the institution’s previous approach of assuming information was not available unless specifically listed. Observers acknowledge this represents an important step by the Bank, but they also believe further improvements can be made to the new policy. Following the information disclosure policy revision, the Bank launched an Open Data Initiative that provides the public with free access to its vast database of development indicators. And, more recently, the institution has made its audited financial statements and its Sanction Board decisions on contractor-corruption cases available for public scrutiny.

In an area where the Bank once moved slowly, it has made important progress. Other development banks are taking similar steps to review and revise their disclosure policies. This is an important point. External observers and stakeholders have long recognized that the World Bank acts as a catalyst for other IFIs. Once the Bank acts, these players tend to follow, so where critics can pressure this key agency to move, the results will be felt liberally throughout the IFI community.

On another front, for the last decade, development officials have been convening high-level deliberations on how to improve aid effectiveness. One thread has caught fire: The need to make aid flows transparent. In 2008, principals attending a ministerial-level forum on aid effectiveness in Ghana launched the International Aid Transparency Initiative (IATI). IATI provides a standard for aid providers to publish their aid data to, in order to show how aid monies are spent. The standard was designed to counter the issue of donors, recipients and civil society stakeholders having  little information about aid flows. This lack of information led donors to duplicate one another’s efforts by spending too much in some areas while neglecting others. Aid recipients did not have a clear understanding of what they received as this lack of knowledge impacted their ability to plan and apply the aid more effectively. Nor did taxpayers and citizens know what their governments were donating or receiving or how to measure accountability for aid monies spent. Civil society organizations, including aidinfo.org, have pushed strongly  to demonstrate how development effectiveness is improved by increasing the transparency of aid flows. Today, these actors are scoring important successes in getting development banks and donor governments, including the United States as of late 2011, to formally adopt IATI as a platform for making their aid flows known. IATI is still in the early stages and has shown much progress to date, with over 75% of all ODA now being covered by IATI signatories. However, there are still many donors yet to sign up to the initiatives and so much work remains to be done.

Finally, as many development activists are aware, there has been an informal gentlemen’s agreement between the United States and European powers that harkens back to the formation of the Bretton Woods institutions: The U.S. government selects presidents for the World Bank and the Europeans select managing directors for the IMF. Starting with the process that anointed Paul Wolfowitz as Bank president in 2005, activists have questioned whether the ongoing quid pro quo arrangement is legitimate. The global economic crisis expedited tensions as poor countries pressured richer counterparts for increasing their representation and voting power on both financial bodies. The behind-closed-doors results of subsequent selections of Robert Zoellick, a U.S. national, to the Bank in 2007 and Christine Legarde, a French national, to the Fund in 2011 continued to escalate calls that future elections be open, transparent and merit-based. A key criticism from numerous civil society organizations and academics is that the current process is unrepresentative because final selections are not necessarily supported by the majority of poor countries. Critics also argue qualified candidates from poor countries are being denied posts that directly influence developing economies. Zoellick recently announced he will not seek a second-term when his current term concludes this June, and this puts the U.S. government in an interesting position. The U.S. has stated it supports an open and merit-based process, but key domestic political players will seek to insure the next president is an American. Expect the debate on transparency of the selection process for the next World Bank president to go into warp-speed this spring.

These are exciting developments. They augur a new era and a new sensibility of what transparency means and why it is worthwhile. Just the debates themselves suggest that actors on all sides, including those traditionally resistant to greater openness and accountability, recognized these principles can improve development effectiveness and improve the legitimacy of implementing agencies. But there is a gap in the story, and one I suggest that even transparency’s most ardent proponents have not fully recognized as imperative. In my final note, I will seek to breach this divide.

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