About 45 people met in Zurich on the 10-11 April for the next in the series of regional consultations being held by the World Bank as part of the FPIRS. Here are some personal impressions and highlights of the meeting. It is not meant to be comprehensive. I found the meeting useful, fairly well-informed and in the end quite constructive. I believe we made progress in discussing the main issues of concern to NGOs.

Participation:

All participants, including NGOs, to the meeting except the IUCN staff and World Bank were self-financed. Participation was thus skewed. Governments, in the form of members of their international development agencies, were most strongly represented but there were only about five NGOs (CI, WWF, Reform the Bank Campaign Italy, SSNC and FPP – Urgewald was unable to attend due to illness). Consultancies were represented by Intercooperation and CIFOR was also present. The forest owners were also present but the private sector was absent (they were expected but I heard there was some other simultaneous meeting which was nearer their heart). The thinness of the NGO participation was disappointing – again no social development, women’s groups or human rights organisations were present. Essentially only those NGOs which have budgets or external funding for World Bank Forest Policy advocacy work were able to attend. However, by mini-caucusing and sharing out the issues and break-outs, we just about covered the meeting.

The meeting was in English only. Documentation was well prepared and quite adequate. There is still no summary of the analytic studies which are still just being referred to as being ‘available on the web-site’ – the money and effort invested in them seems to me to have been wasted, so far.

The review of the IFC is still not available. There is no news about how or when anyone will be consulted on this document, once and if it is released. One sympathetic Bank staffer muttered that this was ‘unacceptable’ – it seems the document was in fact finished two weeks ago but is being held up for internal reasons.

Agenda:

The chairing and agenda was not really opened for approval or discussion but no one seemed to mind. As it turned out everyone found ways to raise their key concerns over the two days. Perhaps because the Bank was able to assume greater knowledge on the part of the participants, the agenda was more focused and less overloaded than the ECA meeting. Day one consisted of presentations by the World Bank and brief discussions to flag up key issues. After lunch there were short but useful presentations by various spokespersons including FAO, DfID, EC and WWF (International). WWF helped articulate some of the key issues in the WRM briefing and helped get the WRM paper distributed. We then had break outs into four themes: governance, forest management, trade/markets and poverty/equity. The second day we had report back, a presentation on the Bank financial tools and then break outs and feedback on: future Bank Forest Strategy, Partnerships, Internal reforms; and the ‘Logging Ban’. A final question and answer session rounded off the meeting.

Role of the IUCN:

According to the Bank, the whole consultation process has been designed with the help of the IUCN who were asked to help after the perceived success of the IUCN’s role in setting up the World Commission on Dams. IUCN staff thus facilitated the meeting and are in charge of the report. Another IUCN staffer was also there as a participant.

Highlights on the content:

Real Purpose of the meeting:

The Bank inferred that the main purpose of the regional meetings is for the Bank to now get a mandate for it to work more effectively and actively on the issue of forests in the future.

(Hence all the meetings in borrower regions are directed to prompting participants to consider how the Bank can help promote policy reforms, investment and development in the forest sector, while all the meetings in the donor regions are directed to highlighting the Bank’s comparative advantages for work in the sector and new forms of ‘partneship’ with bilaterals and (BI)NGOs. Only under NGO pressure has the agenda been modified to allow a scrutiny of the Bank’s internal deficiencies.)

OED introductory observations:

The OED sees the comparative advantage of the Bank lying in policy and institutional reform and not in projects (an interesting insight from a development agency that is meant to address the needs of the poor!). But it has a good perspective on this: ‘Good governance means putting enough of the future into the present’ (quoting Victor Hugo). It feels that the main challenge is effecting reforms in countries which currently have BAD policies while the easy option is to only work in countries with GOOD ones. The degree to which the Bank is influenced by outsiders was highlighted: ‘In many ways the Bank is now managed from the outside’. A key challenge is to restructure the incentives for Task Managers and Country Directors. It notes that ‘Paradoxically, to do no harm the Bank may have to learn to do good’.

OED Review:

It was heartening to note that the power-point presentation on the OED study has been modified in response to persistent criticism and comment. The ‘severe lack of information at the project level’ was highlighted. The failure of compliance was presented now as a negative synergy between an inappropriate policy and weaknesses in staff implementation and not as mainly due to the deficiencies on the policy itself. The agreements and differences of opinion between the OED and NGOs were presented fairly. There was agreement on the need for stronger internal incentives to make staff more pro-active, on the need for a multi-sectoral approach, on the need to tackle illegal logging, the need for more focus on poverty alleviation and the need for a policy with a broader coverage of all forest types. There was divergence or dilemmas over: how to make borrowers pay, how to balance between national priorities and global needs, how to service urban and trade demands while adressing the needs of the rural poor, how to ensure greater borrower ownership of a future policy and whether or how to allow scope for experimental logging for SFM.

Essentially OED saw the Bank as now facing a choice of either just seeking to ensure compliance with the existing policy or adopting a new strategy and reinforcing mechanisms of implementation. This could imply: getting the policy applied in CAS; doing forest related work in ESW; building up implementation capacity and overcoming resource constraints through providing new staff incentives and additional money; making sure adjustment lending takes account of the environment and making more constructive use of adjustment-linked conditionality. The argument on the logging ban was however more or less unchanged (but see below) but the OED now notes that in part the risk averse behaviour is a result of ‘weak internal support mechanisms’. The OED thus thinks the Bank needs a Global Strategy, Country Level strategies, and concessional finance. A new strategy should reconcile conservation and development objectives, address governance and illegal logging issues, have a broader and more eclectic policy, ensure more active implementation of safeguard policies, and move from ‘do no harm’, to ‘do good’. At the same time the Bank should strengthen internal capacity and provide incentives to avoid risk averse behaviour.

A Policy or a Strategy? Will there be safeguards in a future policy?

By the end of the meeting the confusion about whether we were talking about a policy or a strategy provoked loud guffaws from even government representatives. The Bank noted that the 1991 ‘Policy Paper’ now called the Strategy had been more influential than 1993 OP 4.36, which is now the ‘policy’. The main deficiency of the ‘Policy Paper’ is that it does not provide means for implementation.

In response to a specific NGO question about what we could expect from the FPIRS as end products: ESSD was equivocal but the head of OED expressed the strong view that the Bank should  adopt a new ‘strategy’ which made clear how policy goals could be achieved, it should also adopt a revised ‘policy’, this policy should also include safeguards, and this should thereby improve accountability.

At other moments in the meeting other OED and ESSD staff seemed much less keen on safeguard policies and see them as infringements of national sovereignty or as discouragements to staff engagement. The general suspicion about safeguarding was notable and there was some Bank rhetoric about them being an attempt to intervene in local affairs. I was asked to respond to this and argued that although clearly everyone could agree that solutions should principally to be sought at national and local levels, the deployment of ‘safeguard’  policies came about in the context of ongoing or proposed international interventions – in the form of large scale transfers of global capital so we should not be naïve about the context. Safeguard policies have thus been introduced to ensure that the interests of social and environmental sectors, and values which are often not well represented at central government level, are adequately taken into account. Safeguarding is thus crucial to allowing these marginalised sectors and issues to have a place in planning, a mechanism of accountability and means for the redress of grievances. Most people seemed to agree with this.

Structural Adjustment:

It was queried whether under current Bank rules safeguard policies need to be adhered to in SAPs. The answer was that OD 8.60 on adjustment says you have to observe safeguard policies in sectoral but not structural lending. However, the OED pointed out that SAPs are meant to take environmental issues into account. It was agreed that there is no adequate mechanism to achieve this. It was agreed that one was needed. It was also noted that the OP on Structural Adjustment is also currently under review.

It was noted that the IMF only has one and half people working on the environment.

Poverty alleviation:

NGOs made clear that large–scale commercial logging and large-scale plantations were not effective ways of alleviating poverty and indeed often created it. Protected areas also needed to be developed with poverty allevation goals in mind.

There was some Bank argument that development of the forest sector to promote national incomes and to service the needs of urban consumers (some of whom are also poor) could also be considered as part of a poverty alleviation strategy. NGOs expressed scepticism of ‘trickle down’ approaches and the Bank seemed half-hearted in counterin g these arguments.

The Logging Ban:

It became clear that the main pressure (or excuse?) for lifting the ‘logging ban’ was to allow the IFC to build plywood mills etc. and invest in ‘best practice’ logging operations. The Bank also wants to feel free to engage in national forest policy reform. The Bank was forced to admit that no IFC logging should be supported which didn’t adhere to the Bank’s principal mandate of poverty alleviation. It was never made clear why the IFC should want to log old growth forests and NGOs suggested that the main challenge for forest policy was to develop the SFM of secondary and logged over forests. 

It was made clear that the ‘risk averse’ argument as a reason for lifting the ‘logging ban’ simply doesn’t wash with NGOs. This is because forestry projects will become more not less controversial if NGOs think the Bank has adopted  a new policy that allows it to trash valuable forests, and because what is needed are positive incentives for Bank staff to do good projects, not just negative incentives to avoid trouble. Changing the policy doesn’t change the difficulties of working in the sector.

It was noted that most Bank staff agreed on the objectives of the current policy and admit the need for a precautionary approach but don’t want something that causes paralysis.

The break-out group on the ‘logging ban’ did not agree on whether or not the proscription on Bank funding of logging in primary, moist tropical forests, should be maintained, extended to all old growth forests or lifted. If the proscription was to be lifted, which was not agreed, then the group thought that an alternative could be to insist on some safeguard process for deciding which areas could be logged by the Bank in any specific country. The group did agree that safeguards would be needed.

The difficulties of definition of ‘old growth’ or, alternatively, of ‘high conservation value’ forests were brought out. IUCN and WWF were both unclear about their position on the need for a proscription. The other NGOs were all clear that they wanted the ‘ban’ maintained or strengthened.

Concessional Funding:

OED view: Concessional funding is needed to overcome global market imperfections not local ones.

Links to other Instruments:

Donors felt strongly that the Bank is moving too independently and should be developing its policy much more clearly in support of the advances made at the IPF and IFF, in particular to support national forest programmes 9nfp)

The FAO advocated the setting up of a Consultative Group on nfp, which would not be run by the FAO but have a mutlistakeholder governance structure. I couldn’t help noting to the meeting that this was EXACTLY the idea developed in the meetings in 1991 to Revamp the TFAP and which the FAO had at that time vetoed!

Internal Reforms:

A major advance of the meeting was that it now seems to be agreed that the ‘incentive system does still need improvement’, there are ‘very legitimate concerns from civil society’ about this. The problems with the Bank’s support for JFM in India showed ESSD that there was a need for: more staff and more budgets to implement forest related lending; a need to persuade country directors to take forests seriously; the need for sector wide programmes linked to national forest programmes (see notes of break out group for more details on this).

ESSD agreed in the conclusion of the meeting that ‘without effective internal reforms not much will happen’. The challenge was to get these ideas ‘through the system’.

Problems of Decentralization:

According to OED and ESSD, the restructuring of the past two years has led to further domination of operations by the Regional Vice-Presidencies and the Country Directors.

Next steps:

The Bank has now opened nominations to a Technical Advisory Group which will meet in late June and October to advise on the various drafts of a new Strategy and/or Policy on Forests. The nomination procedure is on the web-site.  Nominees must speak English. The drafts texts which will be discussed by the TAG will also be made available on the web for comments.

Annex 1: Break Out Group Notes:

I was rapporteur for one of the Break Out Groups: Here is a summary of what was presented to the plenary.

I. In Search of the Bank’s Comparative advantage in forest related work:

Comparative Advantages:

Convening power: true at high level but not true at all levels. This can also be exaggerated – the Bank tends to be a magnet for criticism.

Providing lines of credit: Yes, but in fact the Bank is moving out of this. Bank economists argue that targetted lending leads to market distortions. Bank staff feel that maybe the Bank is being too dogmatic on this and that there may be a need for targetting credit especially to promote small-scale forest enterprises. To get around the dogma the Bank is providing targetted grants through its APLs.

Addressing non-forest sector connections: While the Bank may be better at this than other donors it is still not very good at it. The OED study has showed that the forest policy is not being well applied in CAS, ESW, SAPs and even in Sectoral Adjustment. And that where it has been applied in some SAPs this has been too clumsy and quick to be effective.

Governance reform: The Bank should not underestimate its leverage. The dilemmas of using conditionality were however emphasised, as it tended to be seen as coercive and was thus resisted or agreed to superficially. The challenge was to achieve greater donor coordination and role sharing and to mix Bank loans with bilateral grant money. It was agreed that effective governance reform requires the build up of effective partnerships including the natural resource ministries and not just the Finance Ministry, other donors and civil society. Long term programmatic engagement with borrower governments and civil society was required.

Adjustment: Two major dilemmas confront the Bank in effecting forest policy reforms through adjustment. The first is that good use of adjustment lending requires long preparation, prior analytic sector work, constituency building and borrower ‘ownership’ of the proposed policy reforms. Detailed Economic and Sector Work is needed to lay the ground for reforms and create a shared awareness that justifies the conditionality.  However adjustments tend to be developed in times of financial crisis and leave little time for all this.

The second dilemma is that while Bank staff may have a comparative advantage in being able to do analytic work and use cross-country comparisons, they cannot (or should not) both prepare loans and appraise them – this would be a conflict of interest.

The OED had been less hopeful than the WRI about the usefulness of adjustment linked conditionality to achieve reforms. It was agreed that the CONDITIONS for imposing the conditionality were the critical factor. It was also agreed that stroke of the pen reforms had to be complemented by long term engagement for programmatic reform through capacity-building, and long term institutional support.

Comparative disadvantages:

Working at the community level: Compared to other development agencies the Bank is not good at community level work. Bank loans tend to be too big since the transactions costs of small loans are considered too high by the Bank. The EU and bilaterals are better at this.

Lack of access to concessional funding or grants: Unlike other donors the Bank has little free money.

Issues based lending: The Bank is considering promoting issues based lending – that is money for specific sectors requiring affirmative action in the global interest or to help overcome market imperfections. The ESSD is thus promoting the idea of the Bank setting aside money for forest related work  which could then be used in countries which express enthusiasm to adhere to the Bank’s new strategy/policy. However, the move is being opposed by the Country Directors and Regional Vice-Presidencies who would lose direct control of this money which would be taken out of their budgets. Borrower governments on the board might also oppose the idea.

Establishing a Concessional Fund: The idea of setting up a concessional fund to address market failures had been proposed by both ESSD and OED. It was queried whether the Bank really has a comparative advantage in handling grants. This was because the Bank cannot readily ensure that monies really get to the community level – so who will really get this money? Secondly it noted that, as the OED review of the GEF showed, the establishment of concessional funds can divert attention away from ‘mainstreaming’. Indeed far from overcoming market distortions it may discourage their correction and even create further market failure. Indeed for exactly these reasons the EC is now phasing out its budget lines because they have discouraged mainstreaming. The EC expressed the view that correcting market failures through internalising externalities was an issue to be addressed at the national level.

Upscaling from ‘model’ projects: It was stressed that scaling up only really works where the political conditions created in the ‘model’ circumstances also exist on a broader scale. Often model projects succeeded due to intensive capacity building and effective civil society mobilisation and engagement. Where this was lacking nationally, attempts to scale up from local experiences tended to fail.

Private Sector: The Bank had the view that its engagement with the private sector could help promote corporate responsibility and best practice. Links between private companies and the Bank could provide them with political protection when they engaged in innovative schemes and could thus be protected from arbitrary government action. Bilateral representatives queried whether these benefits could not be secured as well with the support of Export Credit Schemes and private bank support. NGOs stressed that the Bank would need to first be sure that the innovative schemes really adhered to the Bank’s mission of poverty alleviation.

II. Internal Reforms:

The sub-group noted that effective engagement in the forest sector equally depended on the Bank carrying out internal reforms.  Reforms would be needed: in the way forest issues were addressed in structural lending; to provide the time and resources for forest issues to be addressed in CAS; to unbundle funds so staff could engage in forest linked Economic and Sector Work even when immediate projects in forests were not envisaged. Staff incentives would need to be reformed to provide staff with positive incentives to engage in forest sector work. This meant: providing additional funds for paying transaction costs; increasing the number and skills mix of staff who work on forest-related issues; retrain staff to appreciate the importance of issues like land tenure and participation; and improve participation. New mechanisms to ensure accountability to civil society were thus needed. It was noted that NGOs have a comparative advantage in independent Monitoring and Evaluation and this should be used to verify the performance of both borrower governments and the lending institution. Bank staff expressed the view that ‘nothing will happen unless internal reforms are made’.

Effecting these reforms does nonetheless pose real challenges to the Bank. New mechanisms of resource allocation will be needed to deliver the strategy. This will imply changes in the internal market in the Bank to provide resources for forest sector work. At the moment lending priorities are dominated by the regional boards and the sector boards are not well placed to challenge this.

At present, country strategies and sectoral priorities are dominated by country departments. With the current incentives, country staff work in ways that avoid headaches. ‘Money will not go where transaction costs are higher’ the Bank noted. The new (regionalised) structure agreed by the EDs only two years ago reinforces this tendency. Forests were in one sense exceptional as effective action included addressing global issues, cross-sectoral influences and politically delicate conflicts of interest. On the other hand, the same incentive structure reforms are needed to ensure adherence to the other safeguard policies too.

The Bank was making efforts to improve quality assurance but what was needed was both more independent assessment and clearer performance based indicators, including a score card system on forests, to encourage assessment of forest-related projects based on outputs rather than entry-level compliance. The need for real incentives to achieve participation were also noted but there was not time to discuss them.

It was recommended that as in the FAO, a separate fund should be established to pay the transaction costs of work in the natural resources sector. This way the money would not be fungible and scooped up by other sectors.

Bank staff thought that ONLY increasing money for transaction costs would be unlikely to overcome Country Director reluctance to address forests. Other incentives would be needed as well. Additional money specifically for the sector – eg issue based lending – might also help.

It was noted that the CAS should direct the Country Director to address forests. The trouble is that CAS tend to be written by the Country Director anyway! Even where CAS were developed with better borrower engagement, they tended to marginalise forests. There was a discussion about whether borrower priorities reflected country concerns or tended to be dominated by the concerns of the finance ministry. It was agreed that a key issue was to send a message to Country Directors that they had to engage in forests. They needed positive incentives to do this which were presently lacking. Donor coordination could help achieve this and should be better articulated through the CGs (consultative groups). It was noted that it would be important that Country Directors felt they were engaged in the issue rather than being forced to deal with forests by top-down instructions. They needed to feel rewarded for engaging.

Effecting all this implied a change of balance of power and influence within the Bank. Maybe bringing in operational people into the sector boards could help, or even bring in people from outside the Bank.

Bank staff expressed the view that either we address the internal issues or we get out of the forests. If we can’t do it right, we’d better not do it at all. NGOs pointed out however that the Bank can’t ‘get out of forests’ just by not doing forestry projects. The Bank is impacting forests through its structural loans and its work in other sectors – so it has to deal with forests willy nilly and thus the internal reforms are unavoidable.

The view was expressed that if the Bank was genuinely seeking better coordination and collaboration with other donors, the private sector and civil society, then what was needed was not so much a Bank strategy on forests as a shared strategy on forests. Closer coordination with the UNFF could help achieve this, it was suggested.