Development Banks should be subject to greater scrutiny

0 Comments | Insight on the News, Nov 12, 2002 | by Vicki Gass

Thank you for the interesting article "Corruption Corrodes Development Banks" [Oct. 15-28] by Martin Edwin Andersen. The Inter-American Development Bank is not yet well-known and has escaped the intense study experienced by other multilateral development banks such as the World Bank. Yet its policies and projects have great impact on Latin Americans who ultimately bear the brunt of repaying the loans regardless of whether the projects were done well or badly, or in an economically efficient manner.

I would encourage the next article to focus on possible policy changes that the U.S. Congress or the banks might undertake. For example, recently the House of Representatives unanimously passed HR 2604, the Multinational Development Banks Authorization Act, which would have required the United States' executive directors of the regional development banks to promote greater transparency and accountability. Project design, implementation and evaluation would have to be conducted in a more transparent manner and with the informed participation of the communities to be affected by the proposed projects. Meetings of the board of directors would have to be open to the public and the media, and the transcripts of the meetings made public within a certain time frame.

Equally important, key documents and meeting transcripts would have to be made public prior to the bank board making any decisions. Finally, the U.S. executive directors would have to appear before Congress to testify on an annual basis and submit written reports to legislative committees describing steps taken to achieve transparency goals established by the secretary of the Treasury.

The House bill had other important language regarding dam construction, protecting minimum-wage standards to at least $2 a day and preventing governments from charging fees for services paid for by loans, such as health and education. In support of HR 2604, Rep. Doug Bereuter (R-Neb.) stated that "currently the regional development institutions do not have public meetings, nor are the transcripts of their meetings typically made available to the public."

Unfortunately, this bill never was discussed in the Senate although it is my understanding that a few senators were concerned about appearing to micromanage the banks. Andersen's article demonstrates, however, that a little micromanagement might be in order and that a bill such as HR 2604 urgently is required along with other reforms, such as in the procurement process, the independent-investigation mechanisms and the approval processes of loans. Keep up the good work!

Vicki Gass
Washington Office on
Latin America