Info Service on UN Sustainable Development (Sept17/02)
18 September 2017
Third World Network
World Bank should draft new policy to advance human rights
Published in SUNS #8532 dated 15 September 2017
Geneva, 14 Sep (Kanaga Raja) - A United Nations human rights expert
has called on the World Bank to embark on an inclusive process for
drafting a new and separate human rights policy, which should embody
a commitment to integrate human rights into its work.
Calling for a fundamental rethink, the rights expert proposed a change
of paradigm that would require not only amending the Articles of Agreement
of 1944 (adopted at Bretton Woods, New Hampshire, and last amended
on 16 February 1989), but also ensure clear directives from the Board
of Governors that mainstream human rights into the Bank's activities.
In his report to the UN Human Rights Council, the Independent Expert
on the promotion of a democratic and equitable international order,
Mr Alfred de Zayas (of the United States), also called on the World
Bank to cease promoting labour market deregulation, including through
its funding conditionalities, and instead help to reverse the rise
in income inequality by supporting social dialogue and collective
He further said the World Bank Board of Governors should issue a clear
directive that the International Centre for Settlement of Investment
Disputes must refrain from interfering with the ontological functions
of the State, which are to regulate in the public interest, including
through environmental, health, social and labour legislation.
"The International Centre for Settlement of Investment Disputes
should not lend its services to litigation that puts those functions
of the State into question. Rather the International Centre for Settlement
of Investment Disputes should discover its vocation to serve in an
The Human Rights Council is currently holding its regular thirty-sixth
session here from 11-29 September.
"Progress cannot be measured only by increases in Gross Domestic
Product (GDP) but must also encompass the enhanced enjoyment of human
rights and a higher standard of living," Mr De Zayas said in
a UN news release.
"The World Bank should stop financing projects that adversely
impact people's human rights, and should instead seek to combine economic
growth with the promotion of food security, clean water, health care,
education and employment, as well as the equitable distribution of
wealth," he added.
In his report to the Human Rights Council, Mr De Zayas said that while
international financial institutions can advance human rights and
development, some of their policies have resulted in the erosion of
the enabling human rights environment in some countries, especially
through the promotion of neoliberal policies that weaken the public
sector and hinder States in the fulfilment of their human rights treaty
obligations in the fields of education, health care, labour standards
and an adequate standard of living.
Moreover, by financing enterprises that evade taxes, the World Bank
abets the diversion of public resources away from public services.
Increased Bank support for public-private partnerships enhances the
private sector at the expense of communities, especially when investments
go awry and result in greater costs to governments.
Henceforth, he said, international financial institutions should take
a human rights-based approach to lending, consult stakeholders, conduct
impact assessments, take action to counter reprisals, combat corruption
and accept legal responsibilities by waiving "absolute immunity".
The Independent Expert believes that, since the World Bank and IMF
(the International Monetary Fund) have association agreements with
the United Nations, they must support the General Assembly, the Economic
and Social Council and the United Nations Conference on Trade and
Development (UNCTAD) in advancing the purposes and principles of the
United Nations, as set out in the Charter of the United Nations, and
in advancing human rights and sustainable development, while respecting
the sovereign equality of States and the principle of non-intervention
in the domestic affairs of States.
It bears repeating that the member States of the World Bank and IMF
are also States parties to numerous United Nations human rights treaties,
notably the International Covenant on Civil and Political Rights and
the International Covenant on Economic, Social and Cultural Rights,
and that they must ensure that the policies of financial institutions
and the projects they support do not have adverse effects on human
Bearing in mind that States have an obligation to ensure that investors
and transnational corporations do not violate human rights, States
should use their leverage to strengthen the human rights regime whenever
they negotiate deals with governments to finance specific projects.
In that regard, the Independent Expert recalled the commitments made
in 2015 by States at the United Nations summit for the adoption of
the post-2015 development agenda and the adoption by the General Assembly
of the Sustainable Development Goals.
The Addis Ababa Action Agenda of the Third International Conference
on Financing for Development, adopted in 2015, also calls upon all
development banks to establish or maintain social and environmental
According to the Independent Expert, the present report does not aspire
to tell the Bank what it already knows or what its experts are busy
trying to address. It hopes to formulate realistic recommendations,
applying a human rights-based approach.
"In that regard, the Bank's Articles of Agreement should be amended
to integrate the promotion of human rights, and directives should
be issued by the Board of Governors to mainstream human rights."
A revised mission statement that reconciles the economic and financial
priorities with human rights is desirable. Even the words written
on the great wall at the entrance of the Bank ("Our dream is
a world free of poverty") serve as a call for action, he said.
The report noted that the World Bank acknowledges that "sustainable
development recognizes that growth must be both inclusive and environmentally
sound to reduce poverty and build shared prosperity for today's population
and to continue to meet the needs of future generations. It is efficient
with resources and carefully planned to deliver both immediate and
long-term benefits for people, planet, and prosperity".
To that end, in 2016 the Bank adopted the Environmental and Social
Framework, comprising: a vision for sustainable development, which
sets out the Bank's aspirations regarding environmental and social
sustainability; an environmental and social policy for project financing,
setting out mandatory requirements for projects it supports; and ten
environmental and social standards, setting out mandatory requirements
for borrowers and projects.
There is no shortage of opinions about the impact of the World Bank
on the international order. Some observers contend that the Bank and
IMF have a greater impact on world affairs than all the resolutions
of the United Nations General Assembly and the Economic and Social
Council combined, said the rights expert.
Whereas the Bank has the word "development" in its name,
the question must be answered what development means for the purposes
of the Articles of Agreement. Hitherto, both in doctrine and in practice,
the Bank has understood development to mean growth in terms of gross
domestic product (GDP), increased trade and greater consumption.
Observers have been proposing a different understanding of "development",
as a more equitable distribution of wealth, food security, clean water,
sanitation, health care, housing, education and employment.
Notwithstanding the positive developments, both the Bank and IMF continue
pressing for increased reliance on purely market-based solutions,
following the perspective of "market fundamentalism" that
Joseph Stiglitz often decried.
In 2016, said Mr De Zayas, there was increased cooperation among multilateral
development banks, with a focus on mega-infrastructure projects, a
reliance on public-private partnerships as a way to circumvent constrained
fiscal space, and a continued effort to impose so-called labour flexibilization
and other obsolete conditionalities on States.
"As Naomi Klein recalls in her seminal work, The Shock Doctrine,
the main problem remains the commitment of international financial
institutions to the philosophy of laissez-faire economics, reflecting
Milton Friedman's Chicago school and characterized by the almost religious
belief that privatization and deregulation will advance GDP, notwithstanding
its endemic boom and bust cycles and its minimization of social costs."
For many years, civil society has signalled human rights abuses committed
by companies benefiting from World Bank financing, with numerous publications
documenting those abuses.
Among the most egregious violations are land-grabbing, brutal evictions,
involuntary resettlement, forced labour, child labour, sexual abuse,
massive pollution, destruction of the environment, reprisals against
human rights defenders, corruption and money-laundering.
The report noted that ahead of the Bank spring meeting in April 2016,
Oxfam released a report entitled "The IFC and tax havens",
in which it revealed that 51 of the 68 companies in which the IFC
(the International Finance Corporation) had invested in sub-Saharan
Africa in 2015 used tax havens.
In fact, UNCTAD estimates that developing countries lose $100 billion
annually in tax revenue, from which lost revenues and un-invested
earnings yield a total development finance loss in the range of $250-300
"It is time for the Bank to blacklist projects with companies
that fail to pay their taxes," said Mr De Zayas.
According to the rights expert, there is ample evidence that projects
financed by the Bank cause harm to millions of people.
A 2015 report by the International Consortium of Investigative Journalists
states that from 2009 to 2013, the Bank pumped $50 billion into projects
graded the highest risk for "irreversible or unprecedented"
social or environmental impacts.
The report also indicates that the Bank and IFC have financed governments
and companies accused of human rights violations, including murder
and torture. In some cases, they continue to finance those borrowers
notwithstanding the evidence.
"Among the vulnerable groups that have suffered as a consequence
of major prospecting, mining, logging and hydroelectric enterprises
are indigenous peoples whose lands have been taken away or devastated
though industrial activity, without consultation and without their
free, prior and informed consent."
In 2015, the International Consortium of Investigative Journalists
determined that 3.4 million persons had been physically or economically
displaced by projects funded by the Bank, including Ethiopian Anuak,
who faced a violent campaign of mass evictions funded through the
diversion of funds from a Bank-supported project.
Human Rights Watch has also highlighted instances in which the Bank
failed to observe its own policy of protecting indigenous peoples'
For example, it documented the forcible transfer of the semi-nomadic
Nuer people in the Gambella region of Ethiopia, noting an operational
link between World Bank projects and a government relocation programme
known as "villagization".
The matter came before the Bank Inspection Panel, which indeed found
that the Bank "did not carry out the required full risk analysis,
nor were its mitigation measures adequate".
Civil society has also drawn attention to labour rights violations
in connection with World Bank projects.
The report noted that in the past, the IFC has failed to properly
measure the risks of oil and mining projects, such as in the case
of the Chad-Cameroon pipeline.
In that case, a law intended to earmark oil revenues for education,
health care and other social needs was gutted in Chad and the Bank
ultimately had to suspend its loan to the country.
The rights expert also pointed out that many civil society organizations
have protested the Bank's apparent commitment to the promotion of
public-private partnerships, notwithstanding the challenges they pose
to the regulatory space of governments, especially in the fields of
clean water and sanitation, health services and education.
In fact, the year 2016 was characterized by an intensified push for
mega-projects and public-private partnerships.
"However, experience shows that public-private partnerships have
not served developing countries well," said Mr De Zayas.
The report cited an example where it appears that the flagship health
public-private partnership of IFC threatens to disrupt health-care
programmes in Lesotho.
In 1999, the Queen Mamohato Memorial Hospital, a new hospital run
by the private sector and financed through an IFC loan, was built
to replace the old main public hospital in Lesotho.
Lesotho finds itself locked into an 18-year contract that is already
consuming more than half of the country's health budget, while producing
high returns to the private partner.
"That constitutes a dangerous diversion of scarce public funds
from primary health-care services in rural areas, where three quarters
of the population live. Not only are health public-private partnerships
high risk and costly, they fail to advance the goal of universal and
equitable health coverage," said the rights expert.
In another case, in August 2016, the Minister of Education of Uganda
announced the closure of 63 nursery and primary schools operated by
Bridge International Academies, a private education services provider
partly financed by IFC.
The Minister stated that the decision was based on "danger from
poor hygiene and sanitation on the life and safety of the innocent
Elsewhere in Europe, after examining the use of public-private partnerships
in Portugal, the Organization for Economic Cooperation and Development
(OECD) warned that public-private partnerships "should be chosen
only when they represent good value for money, not because they allow
the government to escape budget restrictions by building up off-balance
Worryingly, however, OECD has continued to endorse public-private
partnerships, stating that "the government should consider expanding
its remit to local public-private partnerships and water, sewage and
Mr De Zayas noted that in 2002, the Bank started the Doing Business
project, with the mandate to rank countries on how their national
regulations operate in favour of the "ease of doing business".
From its inception, he said, the project was criticized for promoting
deregulation and the lowering of social and environmental standards.
The Bank responded by removing the project's "employing workers"
indicator from its scoring methodology, because it undermined labour
standards and internationally recognized workers' rights.
The Oakland Institute has decried that and other flawed benchmarks,
including the "paying taxes" indicator, which rewards the
reduction of all types of corporate taxes, including environmental
and social taxes levied to protect citizens and the planet.
According to the rights expert, the most recent Doing Business report
actually notes as "good reforms" the abolition of environmental
protection fees for corporations in Spain and Viet Nam, and praises
the reduction of private sector taxes in a total of 28 countries.
Another example of incomprehensible interference in the necessary
regulatory space of States is the bad score given to Tanzania as "punishment"
for introducing a workers' compensation tariff to be paid by employers,
and the bad grade accorded to Malta for increasing employers' maximum
social security contribution.
The Independent Expert also addressed the issue of credit rating agencies,
saying that every exercise of power, including economic power, must
be subject to democratic controls, transparency and accountability.
"Many countries believe that inadequate or even deliberately
false credit ratings and questionable rating processes were key contributors
to the Asian financial crisis, and more recently to the global financial
crisis of 2007/08."
It is obvious that reforms are necessary, but it appears that the
Bank is not yet tackling the impact of those institutions, whose ratings
influence the Bank's decisions to grant or deny loans.
It is the view of the Independent Expert that the Bank has a responsibility
to test the reliability of the ratings by private sector agencies,
or develop its own rating mechanisms and institutions that can perform
more objectively and effectively.
THE WAY FORWARD
The Independent Expert welcomed the many positive measures already
taken by the World Bank to address systemic and extrinsic problems
and encouraged the Board of Governors to strengthen World Bank governance
and accountability through enhanced and facilitated access to justice
when abuses occur.
"Bearing in mind that multilateral development banks, including
the World Bank, receive large injections of public money, their biased
approach in support of the private sector in developed and developing
countries must be transformed into a human rights-based approach that
carefully weighs the needs of the populations concerned," he
The Independent Expert believes that a fundamental rethink is necessary
and should result in an explicit definition of new priorities that
puts the interests of billions of human beings who are deprived of
the necessities of life ahead of those of foreign investors.
The rules of the game must be changed so that loans are not granted
on purely economic considerations and that the loan "conditionalities"
henceforth aim at advancing the well-being of the populations concerned.
The Independent Expert points to "the impressive rhetoric and
the beautiful publications of the World Bank" and suggests that
fewer resources should be devoted to public relations and the packaging
of the product, and much more to risk-assessment, monitoring and implementation.
To that end, the Independent Expert proposed a change of paradigm
that would require not only amending the Articles of Agreement of
1944 (adopted at Bretton Woods, New Hampshire, and last amended on
16 February 1989), but also clear directives from the Board of Governors.
Pursuant to article V, section 8 (a) of the Articles of Agreement,
the Bank should cooperate with international organizations having
specialized responsibilities in related fields, including the Economic
and Social Council and UNCTAD, which have proposed plans of action
to advance development and human rights.
At present, article IV, section 10, of the Articles of Agreement could
be interpreted as an obstacle to that paradigm change.
That obsolete provision stipulates that "the Bank and its officers
shall not interfere in the political affairs of any member; nor shall
they be influenced in their decisions by the political character of
the member or members concerned".
However, there is no reason to consider the promotion of human rights
and environmental protection to fall under the scope of the prohibited
"political activity" of the Bank, said Mr De Zayas.
Bearing in mind that the Bank's Articles of Agreement and the Agreement
between the United Nations and the Bank were adopted prior to the
adoption by the General Assembly of the Universal Declaration of Human
Rights, and before the entry into force of the International Covenant
on Civil and Political Rights, the International Covenant on Economic,
Social and Cultural Rights and many other human rights treaties, it
is not unreasonable to expect that the human rights obligations of
States members of the Bank should be advanced and not hindered by
Bank policies, he added.
Article XIII of the Agreement between the United Nations and the Bank
stipulates that the agreement is subject to revision and both parties
are authorized to make supplementary agreements.
"That is a window of opportunity for the Bank to commit itself
to certain key principles of the United Nations, including respect
for the sovereignty of all States and non-interference in the domestic
affairs of States."
That requires acceptance of the fact that States, particularly developing
countries, need flexibility and policy space to implement social policies
aimed at ensuring food security, raising the standard of living, strengthening
labour laws and ensuring access to water and education, which some
privatization projects financed by the Bank have been known to undermine.
Any amendment to the association agreement should strengthen the cooperation
between the Bank and the United Nations, particularly with UNCTAD,
said the rights expert.